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We visited Mahindra new product XUV500 launch and production facility. The attractive pricing
and improved product finish impress us, but we feel short-term benefit to total company volume
will be limited to just 3%. For medium-term, with variants and exports, the product has good
potential. Buy at declines.
Mahindra new product XUV500 - priced attractively, but low volume upside
Mahindra launched its first Global SUV platform based product named XUV500 with pricing of
Rs.1.08mn for to Rs.1.29mn ex-show room Delhi. This is attractive considering that its
premium priced SUV Scorpio is already priced at Rs.0.76mn TO 1.16mn.
Product features : The 8-seater, 2.2 liter diesel engine, 140BHP, 15.1kmpl mileage. It comes
in three variants W6 and W8 for 2WD and W8 all wheel drive.
The nearest competitors for Mahindra new product are Toyota Innova top end versions and
Fortuner, Tata Aria and Safari. We estimate this segment volume at around 3,000-4,000
vehicles per month.
We have built-in around 7,000 sales for this product in rest of FY12F and 15,000 for FY13F.
Considering attractive pricing of the product, we feel there is upside revision scope of 50% for
FY13F volumes, which for total company volumes will be just 1.3%.
Frugal engineering cost continues to surprise
Company has spent a total of Rs.8.5bn for Research and development of this platform. Of this
major portion, Rs.6.5bn is spent towards monocoque platform development, a first of its kind
for the company. The remaining amount was spent for new 6-speed gearbox and upgradation
of Scorpio engine to higher power and torque.
Management highlighted that, its core competency in Indian automobile Industry is controlling
R&D costs so as to generate high ROCE despite low volume. This it wants to repeat with
XUV500 launch also.
The company has created a capacity to manufacture 2,000 vehicles per month on a single
shift basis, which we feel is flexible to increase and accommodate other products for
assembly in future.
Management said that they have developed this product with global market in view, as it
confirms for European crash test and year 2016 emission norms. However, exports will be
slow to build-up as it is still working on distribution alignment with ssyangyong.
Considering new products pricing being overlapped with its Scorpio, it expects some
cannibalisation. But to limit the damage, company has introduced a lower variant of Scorpio
recently, so as to expand the segment and limit the overlap.
We feel the medium-term benefit from this new platform to be higher than short-term visibility
- for new variants of platform, improved quality and finish perception about Mahindra products
benefiting its future new launches like smaller Multi Purpose vehicles (MPV) and SUVs.
The recent stock outperformance to Sensex, limits short-term upside in the stock as it also
trades near our target price. Buy at declines
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We visited Mahindra new product XUV500 launch and production facility. The attractive pricing
and improved product finish impress us, but we feel short-term benefit to total company volume
will be limited to just 3%. For medium-term, with variants and exports, the product has good
potential. Buy at declines.
Mahindra new product XUV500 - priced attractively, but low volume upside
Mahindra launched its first Global SUV platform based product named XUV500 with pricing of
Rs.1.08mn for to Rs.1.29mn ex-show room Delhi. This is attractive considering that its
premium priced SUV Scorpio is already priced at Rs.0.76mn TO 1.16mn.
Product features : The 8-seater, 2.2 liter diesel engine, 140BHP, 15.1kmpl mileage. It comes
in three variants W6 and W8 for 2WD and W8 all wheel drive.
The nearest competitors for Mahindra new product are Toyota Innova top end versions and
Fortuner, Tata Aria and Safari. We estimate this segment volume at around 3,000-4,000
vehicles per month.
We have built-in around 7,000 sales for this product in rest of FY12F and 15,000 for FY13F.
Considering attractive pricing of the product, we feel there is upside revision scope of 50% for
FY13F volumes, which for total company volumes will be just 1.3%.
Frugal engineering cost continues to surprise
Company has spent a total of Rs.8.5bn for Research and development of this platform. Of this
major portion, Rs.6.5bn is spent towards monocoque platform development, a first of its kind
for the company. The remaining amount was spent for new 6-speed gearbox and upgradation
of Scorpio engine to higher power and torque.
Management highlighted that, its core competency in Indian automobile Industry is controlling
R&D costs so as to generate high ROCE despite low volume. This it wants to repeat with
XUV500 launch also.
The company has created a capacity to manufacture 2,000 vehicles per month on a single
shift basis, which we feel is flexible to increase and accommodate other products for
assembly in future.
Management said that they have developed this product with global market in view, as it
confirms for European crash test and year 2016 emission norms. However, exports will be
slow to build-up as it is still working on distribution alignment with ssyangyong.
Considering new products pricing being overlapped with its Scorpio, it expects some
cannibalisation. But to limit the damage, company has introduced a lower variant of Scorpio
recently, so as to expand the segment and limit the overlap.
We feel the medium-term benefit from this new platform to be higher than short-term visibility
- for new variants of platform, improved quality and finish perception about Mahindra products
benefiting its future new launches like smaller Multi Purpose vehicles (MPV) and SUVs.
The recent stock outperformance to Sensex, limits short-term upside in the stock as it also
trades near our target price. Buy at declines
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