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Mahindra & Mahindra
M&M Management Meet
Takeaways
Quick Comment: Dr Pawan Goenka, President of
Automotive and FES division, hosted an analyst meeting to
discuss issues regarding tractor industry. Management
cited that as of now they do not see stress in the tractor
industry and the management maintains its volume
guidance, expects 17/18% growth in FY12 and long-term
industry growth of 10%-11%. We remain EW on M&M.
Some key takeaways from the meeting were.
- April-November tractor industry has grown 19% and M&M
has grown 21%. For FY12, they expect the industry to grow
at 17%-18%, and the long-term growth outlook remains
10%-11%.
- On long-term outlook:
1) Though India is almost close to global average on tractor
penetration, because India is primarily an agricultural
country, there is more scope for penetration growth.
2) Increasing levels of mechanization and labor shortage
are key factors for tractor sales to continue to grow.
3) Management believes that products such as Yuvraj are
garnering good response from smaller famers and expects
this product to contribute to volume growth.
4) Company took a 1.5% price hike in October and has no
further plans to increase prices in near term.
On market share
1) According to management, tractor industry is a fairly stable
market share industry.
2) M&M will strive to maintain current market share of 42% or
go higher by either organic or inorganic modes
Some comments by management on macro environment:
1) No financing stress. While management agrees that PSU
banks have given indication of slowing down agricultural
lending, this is unlikely to affect tractor financing environment,
as PSU banks are only 25% of market. For M&M, private banks
and NBFC's comprise about 50% of financing; 25% is through
cash and the rest through PSU's. NBFC's such as M&M
Finance (captive finance arm) and Kotak Finance are not
seeing any signs of slowdown in lending or NPAs.
2) Rural incomes are holding up well. Management cited
three indicators: 1) Foodgrain production, 2) MSPs and 3)
Credit Growth. All three indicators have slowed versus last year
but are still growing.
Other Key points
1) On segment growth, while currently 31-40HP tractor
segment is doing well, management believes that in the longer
term demand will move towards the 41-50HP tractor segment.
2) Industry now running at high capacity utilization, but over
next 2-3 years significant additions to capacity from M&M, John
Deere etc may bring down utilization.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra
M&M Management Meet
Takeaways
Quick Comment: Dr Pawan Goenka, President of
Automotive and FES division, hosted an analyst meeting to
discuss issues regarding tractor industry. Management
cited that as of now they do not see stress in the tractor
industry and the management maintains its volume
guidance, expects 17/18% growth in FY12 and long-term
industry growth of 10%-11%. We remain EW on M&M.
Some key takeaways from the meeting were.
- April-November tractor industry has grown 19% and M&M
has grown 21%. For FY12, they expect the industry to grow
at 17%-18%, and the long-term growth outlook remains
10%-11%.
- On long-term outlook:
1) Though India is almost close to global average on tractor
penetration, because India is primarily an agricultural
country, there is more scope for penetration growth.
2) Increasing levels of mechanization and labor shortage
are key factors for tractor sales to continue to grow.
3) Management believes that products such as Yuvraj are
garnering good response from smaller famers and expects
this product to contribute to volume growth.
4) Company took a 1.5% price hike in October and has no
further plans to increase prices in near term.
On market share
1) According to management, tractor industry is a fairly stable
market share industry.
2) M&M will strive to maintain current market share of 42% or
go higher by either organic or inorganic modes
Some comments by management on macro environment:
1) No financing stress. While management agrees that PSU
banks have given indication of slowing down agricultural
lending, this is unlikely to affect tractor financing environment,
as PSU banks are only 25% of market. For M&M, private banks
and NBFC's comprise about 50% of financing; 25% is through
cash and the rest through PSU's. NBFC's such as M&M
Finance (captive finance arm) and Kotak Finance are not
seeing any signs of slowdown in lending or NPAs.
2) Rural incomes are holding up well. Management cited
three indicators: 1) Foodgrain production, 2) MSPs and 3)
Credit Growth. All three indicators have slowed versus last year
but are still growing.
Other Key points
1) On segment growth, while currently 31-40HP tractor
segment is doing well, management believes that in the longer
term demand will move towards the 41-50HP tractor segment.
2) Industry now running at high capacity utilization, but over
next 2-3 years significant additions to capacity from M&M, John
Deere etc may bring down utilization.
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