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M a r g i n s d e c l i n e , p r e m i u m v a l u a t i o n s a n o g o !
Mahindra and Mahindra’s (M&M) Q2FY12 performance was a mixed bag.
The topline came moderately below our estimates at | 7,306.8 crore (Idirect estimate: | 7398.6 crore), a jump of 34.5% YoY driven by robust
revenue growth in the automotive (up 35.9% YoY) and FES segment (up
35.5% YoY). The blended realisation improved 3.4% QoQ in the FES
segment due to price hikes of ~1.5% in tractors and a better product mix
while realisations in the auto segment remained flat sequentially. The
EBITDA margins contracted to 12.0% (a fall of 140 bps QoQ) against our
flat expectations as input costs as a proportion to sales increased 67 bps
on account of higher commodity prices. Also, personnel expenses were
higher by | 26 crore due to Esop amortisation costs, which could be a
drag on the margins, going forward. PAT came in higher at | 737 crore
driven by high other income of | 232 crore on higher dividend income.
Highlights of the quarter
M&M witnessed robust volume growth led by auto sales (up 32% YoY) at
1.2 lakh units and FES volumes driven by tractors (up 26% YoY). During
the quarter, M&M faced production constraints as demand outweighed
supply on the auto side especially the pick-up segment. However, the
management believes supply constraints would ease by February 2012.
M&M plans to ramp up the capacity by 5,000 units/month by June 2012.
In the FES division, the company witnessed strong traction with market
share gains of ~2% YoY at 45% and expects tractor growth to be ~18%
for FY12E.
V a l u a t i o n
M&M continues to witness robust volume growth driven by new product
launches in the auto-segment and continues to gain market share in the
FES segment. We remain positive on the volume front and though it faces
margin pressures, our outlook remains cautious. At the current price of |
791, the stock is trading at 16.0x FY13E EPS of | 49.4. We have valued
M&M on an SOTP basis with the standalone business valued at a price of
| 508/share and the subsidiaries (listed/unlisted) valued at | 226/share.
We have arrived at a target price of | 734. We maintain our HOLD rating
on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s d e c l i n e , p r e m i u m v a l u a t i o n s a n o g o !
Mahindra and Mahindra’s (M&M) Q2FY12 performance was a mixed bag.
The topline came moderately below our estimates at | 7,306.8 crore (Idirect estimate: | 7398.6 crore), a jump of 34.5% YoY driven by robust
revenue growth in the automotive (up 35.9% YoY) and FES segment (up
35.5% YoY). The blended realisation improved 3.4% QoQ in the FES
segment due to price hikes of ~1.5% in tractors and a better product mix
while realisations in the auto segment remained flat sequentially. The
EBITDA margins contracted to 12.0% (a fall of 140 bps QoQ) against our
flat expectations as input costs as a proportion to sales increased 67 bps
on account of higher commodity prices. Also, personnel expenses were
higher by | 26 crore due to Esop amortisation costs, which could be a
drag on the margins, going forward. PAT came in higher at | 737 crore
driven by high other income of | 232 crore on higher dividend income.
Highlights of the quarter
M&M witnessed robust volume growth led by auto sales (up 32% YoY) at
1.2 lakh units and FES volumes driven by tractors (up 26% YoY). During
the quarter, M&M faced production constraints as demand outweighed
supply on the auto side especially the pick-up segment. However, the
management believes supply constraints would ease by February 2012.
M&M plans to ramp up the capacity by 5,000 units/month by June 2012.
In the FES division, the company witnessed strong traction with market
share gains of ~2% YoY at 45% and expects tractor growth to be ~18%
for FY12E.
V a l u a t i o n
M&M continues to witness robust volume growth driven by new product
launches in the auto-segment and continues to gain market share in the
FES segment. We remain positive on the volume front and though it faces
margin pressures, our outlook remains cautious. At the current price of |
791, the stock is trading at 16.0x FY13E EPS of | 49.4. We have valued
M&M on an SOTP basis with the standalone business valued at a price of
| 508/share and the subsidiaries (listed/unlisted) valued at | 226/share.
We have arrived at a target price of | 734. We maintain our HOLD rating
on the stock.
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