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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● We visited Mahindra’s Chakan plant for the official unveiling of the
XUV 500. Priced at an attractive Rs1.08 mn, it is positioned
between the Scorpio and premium SUVs starting at Rs1.5 mn.
● The company has an ambitious sales target of 2,000 units/month.
It aims to redefine a new segment like the Scorpio did, by not only
exploiting the pricing gap in the SUV segment but also targeting
sedan buyers of cars like the Honda City and Toyota Corolla.
● The vehicle seems to be great value for money and management
stressed that pricing would not be detrimental to margins. The
entire project cost was only Rs8.5 bn, once again highlighting the
frugal engineering capabilities of Indian R&D engineers.
● Despite the festive season having just started, Mahindra already
has a waiting period on its products; usually at this time, it has an
inventory of 2-3 weeks. We reiterate our view that driven by new
product launches Mahindra's volumes should continue to surprise
the street, and with margin improvements on the horizon, earnings
growth would be even higher. Maintain an OUTPERFORM rating.
Mahindra XUV500 launched
Mahindra launched its new global SUV – XUV500. The vehicle, the
first in India to be developed on a monocoque platform, is designed
with global standards of safety and emissions showcasing R&D
capabilities. The result of increased R&D spend (up 4.5x in five years)
has helped M&M accelerate new launches and deliver better-thanindustry
volume growth . The W6 model is priced at Rs1.08 mn and
the W8 at Rs1.195 mn (ex showroom Delhi) compared to initial
expectations of Rs1.4 mn making it very attractive value for money.
New segment targeted
The company expects to redefine the auto segment with this launch
as Scorpio did over 10 years’ ago. While cannibalisation of Scorpio
volumes remaining a concern, the company believes in its ability to
create different niches and also derives confidence from the Toyota
Fortuner able to create a 1,000 unit per month segment at the Rs2 mn
price point. There would be a phased roll-out with an initial five-city
launch in India and global launch just in South Africa. Eventually, the
company aims to exploit full export potential once visibility is built. The
company also aims to realise greater synergies with Ssangyong (high
powered engines, distribution networks where strong presence).
Management stressed that pricing is not predatory for the company.
The total cost of the project is just Rs8.5 bn, highly commendable
considering that it is built on a new platform. The pricing assumes
VAT incentives would not be available and any reversal of that is a
bonus.
Volumes to remain robust
The company expects volumes to continue robust. Mahindra has
experienced a ~25% growth in volumes this year compared to flat
growth for passenger vehicles. The company believes that its
products that are higher priced at least above Rs600,000 are less
sensitive to adverse macro conditions compared to the lower-priced
Maruti at Rs300,000 or Hyundai at Rs400,000. The company’s
exclusive diesel portfolio has also helped its volumes, with people
shunning petrol vehicles. While Mahindra still commands ~60%
market share in UVs; the bumper launch of models like Figo, Polo,
Beat etc in the passenger car market meant that saturation was
reached their earlier. The company is now seeing greater growth from
Tier 2 cities with both the Scorpio and Xylo having >60% sales from
rural and semi-urban areas. The company has high expectations from
the current festival season and already it is running short on all its
models with waiting periods for all compared to normal inventory
levels of about two weeks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● We visited Mahindra’s Chakan plant for the official unveiling of the
XUV 500. Priced at an attractive Rs1.08 mn, it is positioned
between the Scorpio and premium SUVs starting at Rs1.5 mn.
● The company has an ambitious sales target of 2,000 units/month.
It aims to redefine a new segment like the Scorpio did, by not only
exploiting the pricing gap in the SUV segment but also targeting
sedan buyers of cars like the Honda City and Toyota Corolla.
● The vehicle seems to be great value for money and management
stressed that pricing would not be detrimental to margins. The
entire project cost was only Rs8.5 bn, once again highlighting the
frugal engineering capabilities of Indian R&D engineers.
● Despite the festive season having just started, Mahindra already
has a waiting period on its products; usually at this time, it has an
inventory of 2-3 weeks. We reiterate our view that driven by new
product launches Mahindra's volumes should continue to surprise
the street, and with margin improvements on the horizon, earnings
growth would be even higher. Maintain an OUTPERFORM rating.
Mahindra XUV500 launched
Mahindra launched its new global SUV – XUV500. The vehicle, the
first in India to be developed on a monocoque platform, is designed
with global standards of safety and emissions showcasing R&D
capabilities. The result of increased R&D spend (up 4.5x in five years)
has helped M&M accelerate new launches and deliver better-thanindustry
volume growth . The W6 model is priced at Rs1.08 mn and
the W8 at Rs1.195 mn (ex showroom Delhi) compared to initial
expectations of Rs1.4 mn making it very attractive value for money.
New segment targeted
The company expects to redefine the auto segment with this launch
as Scorpio did over 10 years’ ago. While cannibalisation of Scorpio
volumes remaining a concern, the company believes in its ability to
create different niches and also derives confidence from the Toyota
Fortuner able to create a 1,000 unit per month segment at the Rs2 mn
price point. There would be a phased roll-out with an initial five-city
launch in India and global launch just in South Africa. Eventually, the
company aims to exploit full export potential once visibility is built. The
company also aims to realise greater synergies with Ssangyong (high
powered engines, distribution networks where strong presence).
Management stressed that pricing is not predatory for the company.
The total cost of the project is just Rs8.5 bn, highly commendable
considering that it is built on a new platform. The pricing assumes
VAT incentives would not be available and any reversal of that is a
bonus.
Volumes to remain robust
The company expects volumes to continue robust. Mahindra has
experienced a ~25% growth in volumes this year compared to flat
growth for passenger vehicles. The company believes that its
products that are higher priced at least above Rs600,000 are less
sensitive to adverse macro conditions compared to the lower-priced
Maruti at Rs300,000 or Hyundai at Rs400,000. The company’s
exclusive diesel portfolio has also helped its volumes, with people
shunning petrol vehicles. While Mahindra still commands ~60%
market share in UVs; the bumper launch of models like Figo, Polo,
Beat etc in the passenger car market meant that saturation was
reached their earlier. The company is now seeing greater growth from
Tier 2 cities with both the Scorpio and Xylo having >60% sales from
rural and semi-urban areas. The company has high expectations from
the current festival season and already it is running short on all its
models with waiting periods for all compared to normal inventory
levels of about two weeks.
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