Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
High sales volume growth (22% yoy) helped M&M overcome EBITDA margin pressure and
record 7% yoy growth in 1QFY12 PAT. With new product launches and festival demand drivers
ahead, we maintain our FY12 EPS forecast. Rolling forward parent PE valuations to FY13F, we
marginally lift our target price. Buy.
1Q results a positive surprise, driven by auto division
M&M’s 1Q results beat our estimates by 18% on EBITDA and 5% on PAT (in line with Bloomberg
consensus). The EBITDA surprise was driven by a sharp saving in manufacturing and other
expenses (-14.6% qoq), though the PAT surprise was limited as a result of higher-than-expected
tax rate. The Rs256m charge for the employee stock option plan (ESOP) (40bp of net sales)
seems a recurring phenomenon. The EBITDA margin slid 170bp yoy and 15bp qoq as raw
material costs rose. The auto division surprised us with a 17bp qoq rise in EBIT margins. The
farm equipment division’s 100bp drop was in line with our expectation, although the 25% qoq rise
in capital employed is a concern.
Strong sales volume traction helps retain EPS
M&M recorded 22% yoy growth in 1Q sales volume, driven by new Maximmo LCV products and
its flagship UV Bolero. The below-normal rainfall is a concern for demand in rural areas, notably
for tractors. However, given the high water table and good rainfall in India’s ‘bread basket’ areas,
we expect tractor demand to remain strong and, thus, maintain our FY12 and FY13 estimates.
For the auto division, we marginally raise our volume estimates given the current waiting lists for
its volume drivers: Bolero and pickup trucks. This should help absorb ESOP costs, supporting our
unchanged EPS forecast in FY12 and 2.9% raise in FY13F.
Roll forward valuation to FY13F; target price up slightly
We incorporate the current market price of listed subsidiaries, which results in our total
subsidiaries’ value rising to Rs179.3/share (from Rs.170.2). Adjusted for subsidiary value, the
stock trades at what we see as an attractive valuation of 9.3x FY13F PE. For the parent, we roll
forward our valuation to FY13F and value it at 12.5x FY13F PE, the average for our India
automobile universe. This leads to our SOTP-based target price rising slightly to Rs818.7, which
implies 22% potential upside. We feel the stock’s sharp correction in recent months, on concerns
of duty on diesel cars, is overdone as we expect only about 20% of FY11 sales to be in the
personal vehicle category. Buy for strong rural demand growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
High sales volume growth (22% yoy) helped M&M overcome EBITDA margin pressure and
record 7% yoy growth in 1QFY12 PAT. With new product launches and festival demand drivers
ahead, we maintain our FY12 EPS forecast. Rolling forward parent PE valuations to FY13F, we
marginally lift our target price. Buy.
1Q results a positive surprise, driven by auto division
M&M’s 1Q results beat our estimates by 18% on EBITDA and 5% on PAT (in line with Bloomberg
consensus). The EBITDA surprise was driven by a sharp saving in manufacturing and other
expenses (-14.6% qoq), though the PAT surprise was limited as a result of higher-than-expected
tax rate. The Rs256m charge for the employee stock option plan (ESOP) (40bp of net sales)
seems a recurring phenomenon. The EBITDA margin slid 170bp yoy and 15bp qoq as raw
material costs rose. The auto division surprised us with a 17bp qoq rise in EBIT margins. The
farm equipment division’s 100bp drop was in line with our expectation, although the 25% qoq rise
in capital employed is a concern.
Strong sales volume traction helps retain EPS
M&M recorded 22% yoy growth in 1Q sales volume, driven by new Maximmo LCV products and
its flagship UV Bolero. The below-normal rainfall is a concern for demand in rural areas, notably
for tractors. However, given the high water table and good rainfall in India’s ‘bread basket’ areas,
we expect tractor demand to remain strong and, thus, maintain our FY12 and FY13 estimates.
For the auto division, we marginally raise our volume estimates given the current waiting lists for
its volume drivers: Bolero and pickup trucks. This should help absorb ESOP costs, supporting our
unchanged EPS forecast in FY12 and 2.9% raise in FY13F.
Roll forward valuation to FY13F; target price up slightly
We incorporate the current market price of listed subsidiaries, which results in our total
subsidiaries’ value rising to Rs179.3/share (from Rs.170.2). Adjusted for subsidiary value, the
stock trades at what we see as an attractive valuation of 9.3x FY13F PE. For the parent, we roll
forward our valuation to FY13F and value it at 12.5x FY13F PE, the average for our India
automobile universe. This leads to our SOTP-based target price rising slightly to Rs818.7, which
implies 22% potential upside. We feel the stock’s sharp correction in recent months, on concerns
of duty on diesel cars, is overdone as we expect only about 20% of FY11 sales to be in the
personal vehicle category. Buy for strong rural demand growth.
No comments:
Post a Comment