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Mahindra & Mahindra (MM)
Automobiles
Market share gains likely to support volume growth. We believe M&M is likely to
increase its market share in both utility vehicle and tractor segments in FY2012E. Bolero
and Scorpio volumes have grown by >30% yoy between April and August 2011 which
has led to a 7.4% increase in market share for M&M. M&M has also increased its
tractor market share by 2.2% in 1QFY12, which we believe is sustainable. We maintain
our ADD rating and increase our target price to Rs900 (from Rs830 earlier).
Strong volume growth likely to aid in robust expansion in earnings
Between April and August in FY2012, M&M’s utility vehicle volumes have grown by 17% yoy
gaining 7.4% market share driven by strong performance from Bolero and Scorpio models. We
estimate 11% yoy growth in volumes for the domestic utility vehicle segment over September
2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will be able to retain its
market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and the global SUV.
We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe M&M
will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in M&M’s domestic
tractor volume estimates for FY2012E. Mahindra & Mahindra has gained 220 bps market share yoy
in 1QFY12 driven by strong growth in West and South India where M&M has close to 48-54%
market share, higher than its overall market share of 43%. South and West regions have grown by
38% and 25% yoy, respectively, in 1QFY12.
We revise our target price to Rs900 (from Rs830 earlier)
We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in our
volume estimates, primarily reflecting increase in our utility vehicle volume estimates by 2%. We
have increased our target price to Rs900 (from Rs830 earlier) based on sum of the parts valuation
methodology. We value the standalone business at Rs698/share (at 14X FY2013E parent earnings
less dividend from subsidiaries) and subsidiaries at Rs201/share.
Key risks to our call include: (1) Increase in tax on passenger diesel vehicles by the government, (2)
rising agricultural NPAs which could pose a threat to the tractor volume growth and (3) sharp rise
in commodity costs.
Maintain our ADD rating; raise target price to Rs900 (from Rs830 earlier)
We maintain our ADD rating on the stock and increase our target price to Rs900 (from
Rs830 earlier) based on 4% increase in our earnings estimates over FY2012-13E. Our target
price is based on the sum of the parts valuation methodology. We value the standalone
business at Rs698/share (at 14X FY2013E parent earnings less dividend from subsidiaries)
and subsidiaries at Rs201/share. We have increased our PE multiple from 13X to 14X for the
same business due to improved visibility in the market share gains in the utility vehicle
segment.
We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in
our volume estimates, primarily reflecting increase in our utility vehicle volume estimates by
2%. Between April and August in FY2012, M&M’s utility vehicle volumes have grown by
17% yoy gaining 7.4% market share driven by strong performance from Bolero and Scorpio
models. We estimate 11% yoy growth in volumes for the domestic utility vehicle segment
over September 2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will
be able to retain its market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and
the global SUV.
We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe
M&M will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in
M&M’s domestic tractor volume estimates for FY2012E. Mahindra & Mahindra has gained
220 bps market share yoy in 1QFY12 driven by strong growth in West and South India
where M&M has close to 48-54% market share, higher than its overall market share of 43%.
South and West regions have grown by 38% and 25% yoy, respectively, in 1QFY12 while
North region has grown at a muted 1.1% yoy and East region has seen a decline of 2.5%
yoy in 1QFY12. Tamil Nadu, Karnataka and Andhra Pradesh have grown in the range of 35-
60% yoy in 1QFY12 while Gujarat has grown by 79% yoy in 1QFY12. M&M has a dominant
market share in these regions which has led to an increase in its market share in 1QFY12.
Escorts has lost market share to TAFE and M&M.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MM)
Automobiles
Market share gains likely to support volume growth. We believe M&M is likely to
increase its market share in both utility vehicle and tractor segments in FY2012E. Bolero
and Scorpio volumes have grown by >30% yoy between April and August 2011 which
has led to a 7.4% increase in market share for M&M. M&M has also increased its
tractor market share by 2.2% in 1QFY12, which we believe is sustainable. We maintain
our ADD rating and increase our target price to Rs900 (from Rs830 earlier).
Strong volume growth likely to aid in robust expansion in earnings
Between April and August in FY2012, M&M’s utility vehicle volumes have grown by 17% yoy
gaining 7.4% market share driven by strong performance from Bolero and Scorpio models. We
estimate 11% yoy growth in volumes for the domestic utility vehicle segment over September
2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will be able to retain its
market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and the global SUV.
We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe M&M
will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in M&M’s domestic
tractor volume estimates for FY2012E. Mahindra & Mahindra has gained 220 bps market share yoy
in 1QFY12 driven by strong growth in West and South India where M&M has close to 48-54%
market share, higher than its overall market share of 43%. South and West regions have grown by
38% and 25% yoy, respectively, in 1QFY12.
We revise our target price to Rs900 (from Rs830 earlier)
We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in our
volume estimates, primarily reflecting increase in our utility vehicle volume estimates by 2%. We
have increased our target price to Rs900 (from Rs830 earlier) based on sum of the parts valuation
methodology. We value the standalone business at Rs698/share (at 14X FY2013E parent earnings
less dividend from subsidiaries) and subsidiaries at Rs201/share.
Key risks to our call include: (1) Increase in tax on passenger diesel vehicles by the government, (2)
rising agricultural NPAs which could pose a threat to the tractor volume growth and (3) sharp rise
in commodity costs.
Maintain our ADD rating; raise target price to Rs900 (from Rs830 earlier)
We maintain our ADD rating on the stock and increase our target price to Rs900 (from
Rs830 earlier) based on 4% increase in our earnings estimates over FY2012-13E. Our target
price is based on the sum of the parts valuation methodology. We value the standalone
business at Rs698/share (at 14X FY2013E parent earnings less dividend from subsidiaries)
and subsidiaries at Rs201/share. We have increased our PE multiple from 13X to 14X for the
same business due to improved visibility in the market share gains in the utility vehicle
segment.
We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in
our volume estimates, primarily reflecting increase in our utility vehicle volume estimates by
2%. Between April and August in FY2012, M&M’s utility vehicle volumes have grown by
17% yoy gaining 7.4% market share driven by strong performance from Bolero and Scorpio
models. We estimate 11% yoy growth in volumes for the domestic utility vehicle segment
over September 2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will
be able to retain its market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and
the global SUV.
We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe
M&M will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in
M&M’s domestic tractor volume estimates for FY2012E. Mahindra & Mahindra has gained
220 bps market share yoy in 1QFY12 driven by strong growth in West and South India
where M&M has close to 48-54% market share, higher than its overall market share of 43%.
South and West regions have grown by 38% and 25% yoy, respectively, in 1QFY12 while
North region has grown at a muted 1.1% yoy and East region has seen a decline of 2.5%
yoy in 1QFY12. Tamil Nadu, Karnataka and Andhra Pradesh have grown in the range of 35-
60% yoy in 1QFY12 while Gujarat has grown by 79% yoy in 1QFY12. M&M has a dominant
market share in these regions which has led to an increase in its market share in 1QFY12.
Escorts has lost market share to TAFE and M&M.
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