Mahindra & Mahindra : August sales up by 25% y/y driven by strong LCV and tractor demand; re-iterate Overweight:: JPMorgan

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M&M’s unit sales grew +25% yoy over the month, given all round growth
- the automotive segment grew +28% yoy and the farm equipment
segment sales grew (+19% yoy).
 Automotive segment growth was driven by LCV’s which came in at
12,563 units (+67%yoy), driven by ramp up of the Maximmo and the
pick up portfolio. However, passenger UV sales (+9% yoy) moderated
this month while low value three wheeler sales grew by 26%yoy. While
management has highlighted that volume growth for the automotive
industry is likely to moderate to c.10% yoy (given macro headwinds),
the OEM will grow ahead of industry given that they have a refreshed
product portfolio (Maximmo, new SUV launch, Genio pick ups).
 Farm equipment sales continue to surprise: Tractor sales at 16,003
units were up +19% yoy - driven by the prospects of a normal monsoon.
Sales for tractors +19% YTD are running ahead of management’s
FY12E guidance of c.12%. M&M will ramp up the capacity of the
Yuvraj to 1,500 units p.m. by year end.
 Mahindra & Mahindra Financial Services (MMFS) may get
Banking license: As per new draft bank license guidelines released
earlier this week, NBFCs are allowed to bid for new banking licenses.
Our banking analyst Sheshadri Sen believes MMFS could be one of the
NBFC’s that would be able to meet requirements to get a banking license.
Given the holding restrictions proposed, M&M would have to merge all
existing financing businesses into the new bank, though.
 Over the month, the stock price (+2% yoy) outperformed the broader
BSE Sensex (-8% yoy). We re-iterate our OW stance on the stock as the
OEM is benefiting from a refreshed product portfolio in the automotive
segment as well as sustained growth in the FES segment.