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Mahindra & Mahindra (MAHM.BO) OUTPERFORM J. Chawla
CP: Rs 695.20 TP: Rs 832 CAP: Rs 426b 91 22 6777 3719
Ssangyong CY11 AR: Low debt levels imply no further need for cash infusion by parent
One of the worries over the Mahindra stock is that the company will have to make substantial investments in its loss-making
subsidiaries. We analyse Ssangyong's CY11 annual report to understand its investment needs.
With the fresh investment from M&M, Ssangyong's debt/equity has fallen from 0.80 to 0.17. We reckon Ssangyong needs
cash of ~W300 bn (US$260 mn) over the next two years, all of which can come from raising debt as that would still take
D/E to 0.9 only.
In CY11, Ssangyong's volumes grew 40% YoY on the back of the new Korando. What was particularly encouraging was
the improvement in realisations in the domestic market, indicating they are not having to offer aggressive discounts to get
volumes.
There are signs of synergies in both joint development and cross selling with Mahindra coming through. We expect
Ssangyong to breakeven only in CY14 when the next new model is launched. We continue to expect robust growth in
M&M's domestic auto business and believe that despite the current gloom, tractor volumes in FY13 would still remain flat;
maintain OUTPERFORM
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MAHM.BO) OUTPERFORM J. Chawla
CP: Rs 695.20 TP: Rs 832 CAP: Rs 426b 91 22 6777 3719
Ssangyong CY11 AR: Low debt levels imply no further need for cash infusion by parent
One of the worries over the Mahindra stock is that the company will have to make substantial investments in its loss-making
subsidiaries. We analyse Ssangyong's CY11 annual report to understand its investment needs.
With the fresh investment from M&M, Ssangyong's debt/equity has fallen from 0.80 to 0.17. We reckon Ssangyong needs
cash of ~W300 bn (US$260 mn) over the next two years, all of which can come from raising debt as that would still take
D/E to 0.9 only.
In CY11, Ssangyong's volumes grew 40% YoY on the back of the new Korando. What was particularly encouraging was
the improvement in realisations in the domestic market, indicating they are not having to offer aggressive discounts to get
volumes.
There are signs of synergies in both joint development and cross selling with Mahindra coming through. We expect
Ssangyong to breakeven only in CY14 when the next new model is launched. We continue to expect robust growth in
M&M's domestic auto business and believe that despite the current gloom, tractor volumes in FY13 would still remain flat;
maintain OUTPERFORM
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