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M&M is a strong rural India story benefited by rising agriculture incomes. The farm equipment sector is
estimated to grow by 11-13% in FY2012 due to an expectation of better monsoon and greater need for farm
mechanisation following labour shortages.
The automotive sector is expected to grow by 12-15% in FY2012. The new sports utility vehicle (SUV) XUV 500
as well as the existing utility vehicles (UVs) + pick-ups portfolio are expected to deliver a good volume growth
for the year.
The company is expecting partial roll-back of the Maharashtra VAT reversal decision shortly. While negatives
have been factored in, any decision on the roll-back by the government will be positive for the company.
Launches expected in FY2012: new SUV, Reva electric NXR, M&M-Navistar trucks and SsangYong SUVs in India.
Our SOTP based price target for M&M is Rs865 per share as we value the core business at Rs708 a share and
the subsidiaries at Rs157 a share. We recommend Buy on the stock.
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