Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MAHM.BO)
Sell Equity Research
In line with expectations; revenue growth offset by lower margins
What surprised us
Mahindra & Mahindra (M&M) reported standalone 1QFY12 net income of
Rs6bn, up 8% yoy. This was 4% below GS estimates and in line with
Bloomberg consensus. Auto segment revenue grew 23% yoy, while FES
segment revenue grew 13% yoy. Key takeaways: 1) M&M reported a yoy
decline in EBITDA margin by 170bp, on the back of a 250bp increase in raw
material prices; 2) Price hikes of 1%-1.5% were implemented by the
company in the auto division during the quarter to offset rising costs. A
price hike was also taken by the company for the FES division in July; 3)
Interest expense was high due to an increase in working capital as
inventory was built up in anticipation of an increase in sales for the festive
season during September-October, in our view; 4) management expects
sales to grow faster than the industry growth in the range of 10%-12%
across all segments on the back of reduced capacity constraints and strong
new product launch pipeline; 5) M&M expects to report consolidated
earnings that will include results of the Navistar JV, Chakan manufacturing
subsidiary, and other non-auto and FES segments later in August.
What to do with the stock
We maintain our Sell rating on M&M as we see higher relative upside
among other stocks in our India auto coverage. Our 12-month FY12E P/Ebased TP of Rs643 remains unchanged. The stock trades above historical
averages on P/E, P/E relative to MSCI India index, EV/GCI, and EV/EBITDA
multiples. Key risks: Strong near-term demand momentum continuing
despite high inflation, lower commodity costs or interest rates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MAHM.BO)
Sell Equity Research
In line with expectations; revenue growth offset by lower margins
What surprised us
Mahindra & Mahindra (M&M) reported standalone 1QFY12 net income of
Rs6bn, up 8% yoy. This was 4% below GS estimates and in line with
Bloomberg consensus. Auto segment revenue grew 23% yoy, while FES
segment revenue grew 13% yoy. Key takeaways: 1) M&M reported a yoy
decline in EBITDA margin by 170bp, on the back of a 250bp increase in raw
material prices; 2) Price hikes of 1%-1.5% were implemented by the
company in the auto division during the quarter to offset rising costs. A
price hike was also taken by the company for the FES division in July; 3)
Interest expense was high due to an increase in working capital as
inventory was built up in anticipation of an increase in sales for the festive
season during September-October, in our view; 4) management expects
sales to grow faster than the industry growth in the range of 10%-12%
across all segments on the back of reduced capacity constraints and strong
new product launch pipeline; 5) M&M expects to report consolidated
earnings that will include results of the Navistar JV, Chakan manufacturing
subsidiary, and other non-auto and FES segments later in August.
What to do with the stock
We maintain our Sell rating on M&M as we see higher relative upside
among other stocks in our India auto coverage. Our 12-month FY12E P/Ebased TP of Rs643 remains unchanged. The stock trades above historical
averages on P/E, P/E relative to MSCI India index, EV/GCI, and EV/EBITDA
multiples. Key risks: Strong near-term demand momentum continuing
despite high inflation, lower commodity costs or interest rates.
No comments:
Post a Comment