India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MM)
Automobiles
Annual report analysis. M&M’s volumes grew by 25% yoy in FY2011 driven by new product
launches and strong rural growth. While M&M lost market share in the utility segment by 2.5%
in FY2011 due to capacity constraints, the company managed to maintain its market share in the
tractor segment. We present the key highlights of the FY2011 annual report in this note. We
increase our target price to Rs800 (from Rs770 earlier) due to increase in our tractor volume
estimates. Maintain ADD rating on the stock.
M&M loses market share in utility vehicles but maintains market share in tractor segment
Mahindra and Mahindra lost 2.5% market share in the domestic utility vehicle segment. Pick-up
volumes declined by 10% yoy in FY2011 which led to domestic utility vehicle volume growth
including pick-ups of 7.5% yoy. The company also achieved an impressive 62.2% yoy growth in
exports volumes primarily driven by strong growth in SAARC, Chile and South Africa. Maxximo
(0.75 ton 4-wheeler cargo vehicle) established its presence in the small cargo segment with a
market share of 19.1% achieving volumes of 35,464 units in FY2011. In the tractor segment,
M&M domestic volumes of 2,02,513 achieved a growth of 21.7% yoy. The company marginally
improved its market share in the tractor segment to 42% in FY2011 versus 41.4% in FY2010.
Other key highlights of the annual report
�� R&D expense almost doubled yoy in FY2011, increasing to 3.3% of gross revenues.
�� In FY2011, M&M allotted 32,16,758 options to the employees out of 1,73,53,034 options
granted to the trust at Rs 5/share. Fair value of options on January 28, 2011 was Rs649.7/share.
Employee costs increased by Rs2.47 bn of which ESOP cost was Rs2.07 bn.
�� M&M saved Rs2.1 bn in working capital due to reduction in recievables and increase in creditor
days.
�� The company invested Rs24 bn in subsidiaries of which Rs22.7 bn was invested in 3 subsidiaries
– Ssangyong Motors, Mahindra Reva and Mahindra Vehicle Manufacturers Limited
(manufacturing subsidiary in Chakan).
We have revised our earnings upwards by 5-6% over FY2012-13E
We have revised our earnings estimates upwards by 5-6% over FY2012-13E driven by 3% increase
in our tractor volume estimates. Our SOTP based target price has been increased to Rs800 (from
Rs770 earlier). We maintain our ADD rating on the stock.
Domestic UV volume growth in FY2011 was muted at 7.5% yoy
The company posted a 17.5% yoy volume growth in the domestic utility vehicle segment (ex
pick-ups) and lost 2.5% market share in the utility vehicle segment in FY2011. Pick-up
segment declined by 10% yoy which resulted in domestic utility vehicle volumes (including
pick-ups) increasing at a muted pace of 7.5% yoy in FY2011.
The company had also launched Maxximo (0.75 ton 4-wheeler cargo vehicle) in February
2010 which established its presence in the small cargo segment with a market share of
19.1% achieving volumes of 35,464 units in FY2011. The company had also launched Gio
(0.5 ton cargo vehicle) last year and achieved volumes of 9,264 units in FY2011.
Subsequently to boost its market share company has launched 4 new products – Genio,
Maxximo Mini Van, Compact cab- Gio passenger and Thar.
Company also achieved an impressive 62.2% yoy growth in exports volumes primarily driven
by strong growth in SAARC, Chile and South Africa.
M&M maintained its market share in the tractor segment in FY2011
M&M sold 2,14,325 tractors in FY2011 (+22.3% yoy) with domestic volumes of 2,02,513
achieving a growth of 21.7% yoy. The company marginally improved its market share in the
tractor segment to 42% in FY2011 versus 41.4% in FY2010. Company’s exports volumes
grew by 33.7% yoy in FY2011 driven by 54% yoy increase in exports to US and 31% yoy
growth in exports to China. Mahindra launched a new multi application tractor called Arjun
MAT which could be used for normal agricultural purposes and can be used as a harvester
during the year. The company also launched refreshed versions of Sarpanch, Bhoomiputra
and XM series from the Swaraj brand.
Mahindra AppliTrac division formed to promote agricultural mechanization continued its
part to improve agricultural productivity. AppliTrac has ensured steady stream of new
products like Agri construction equipment attachments, baler, G2 13ft loader, sugarcane
lifter, straw reaper for wheat and Rotavator. Rotavator sales increased three fold in FY2011.
Rotavator ensures more efficient land preparation.
In the powerol segment, company’s engine volumes declined by 42.2% yoy to 27,748 units
in FY2011 primarily impacted by poor performance of the telecom sector. The company is
now focusing on UPS/inverter segment to offset decline in telecom genset volumes which
could pose a threat to Exide and Amararaja, in our view.
The company has also acquired 38% stake in EPC Industries, one of the leading micro
irrigation companies in India, to improve water utilization in farms and improve farm
productivity.
Subsidiary performance has improved in FY2011
Subsidiary profits (including joint ventures) increased by 7% yoy in FY2011 (consolidated –
standalone profits). We have highlighted the performance of the key subsidiaries below.
Among the subsidiaries which have shown a sharp improvement are Mahindra and
Mahindra financial services, Mahindra Renault Limited, Mahindra Systech and Mahindra
Vehicle Manufacturers Limited. While the subsidiaries which have shown a increase in losses
are Mahindra two-wheelers, Mahindra Navistar, Mahindra Retail and Mahindra Reva.
Mahindra two-wheelers performance got impacted due to increase in marketing expenses of
the Rodeo motorcycle, in our view. Mahindra Navistar was impacted by increase in launch
costs related to new product launches, in our view.
We revise our earnings upwards by 5-6% over FY2012-13E due to increase in
tractor volume estimates
We have revised our tractor volume assumptions upwards by 3% over FY2012-13E due to
strong growth in tractor volumes primarily driven by shortage of farm labor. We now expect
tractor volume growth of 15% yoy in FY2012E from 12% yoy earlier. We have revised our
earnings upwards by 5-6% over FY2012-13E and increased our target price to Rs800 (from
Rs770 earlier) driven by increase in our tractor volume estimates
No comments:
Post a Comment