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The M&M management team comprising of - Mr. V. S. Parthasarthy - Group
CIO, EVP-Finance & M&A, Ms. Sandhya Sharma - VP - Corp. Fin. & IR, Mr.
Rajen Kavadia - Manager - IR and Ms. Gaytri Udeshi - Manager - IR, shared
their outlook on the industry and company
Key highlights
n Tractors segment: Expect demand to sustain driven by higher rural penetration, good
monsoons, onset of festival season and increasing usage in haulage applications.
Seasonally, Q2/Q3 is better than Q1 owing to festival season and good harvest.
n Current demand scenario is similar to what was witnessed in Punjab during the
green revolution. The difference is - it is visible in larger parts of the country and
hence,such a sharp jump in growth numbers
n Segment wise 30 HP - 40HP is driving industry growth. However, 40- 50 HP segment
is gaining traction and can be the key driver of growth ,going ahead
n M&M made inroads in the low (15 HP) segment with Yuvraj, which is gaining popularity
among farmers. Company is selectively opening up in new markets with the latest
addition being Maharashtra and Karnataka.
n M&M is increasingly focusing on contributing to farmer's prosperity in terms of
knowledge enhancement, business opportunities, etc
n Utility Vehicle segment: Capacity addition across segments is in sync with rising
demand. Engine capacity is being increased to reduce waiting periods. Key advantage
arises from flexibility to utilize engines across platforms
n Finance availability rather than interest rates, is the key parameter affecting demand.
Not witnessing any constraints with finance availability. In-house financing arm - M&M
Finance usually finances ~35-40% of total vehicles sold.
n M&M is prepared to handle any shift in demand for diesel/petrol vehicles with
introduction of duty/price hike on diesel vehicles.
n Exports: Expect the demand momentum to be maintained and improve with addition
of Ssangyong
n Capex: Maintains capex/investment target of ~ Rs 70bn over the next three years.
Valuations
We value the company on SOTP basis and have upgraded our TP by ~6% to Rs 825 due
to clarity on fully diluted number of shares (at 614 mn shares vs our estimate of 655 mn
shares). We have assigned a value of Rs 660 to standalone business, Rs 145 to listed
subsidiaries and Rs 20 to MVML. We retain our BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The M&M management team comprising of - Mr. V. S. Parthasarthy - Group
CIO, EVP-Finance & M&A, Ms. Sandhya Sharma - VP - Corp. Fin. & IR, Mr.
Rajen Kavadia - Manager - IR and Ms. Gaytri Udeshi - Manager - IR, shared
their outlook on the industry and company
Key highlights
n Tractors segment: Expect demand to sustain driven by higher rural penetration, good
monsoons, onset of festival season and increasing usage in haulage applications.
Seasonally, Q2/Q3 is better than Q1 owing to festival season and good harvest.
n Current demand scenario is similar to what was witnessed in Punjab during the
green revolution. The difference is - it is visible in larger parts of the country and
hence,such a sharp jump in growth numbers
n Segment wise 30 HP - 40HP is driving industry growth. However, 40- 50 HP segment
is gaining traction and can be the key driver of growth ,going ahead
n M&M made inroads in the low (15 HP) segment with Yuvraj, which is gaining popularity
among farmers. Company is selectively opening up in new markets with the latest
addition being Maharashtra and Karnataka.
n M&M is increasingly focusing on contributing to farmer's prosperity in terms of
knowledge enhancement, business opportunities, etc
n Utility Vehicle segment: Capacity addition across segments is in sync with rising
demand. Engine capacity is being increased to reduce waiting periods. Key advantage
arises from flexibility to utilize engines across platforms
n Finance availability rather than interest rates, is the key parameter affecting demand.
Not witnessing any constraints with finance availability. In-house financing arm - M&M
Finance usually finances ~35-40% of total vehicles sold.
n M&M is prepared to handle any shift in demand for diesel/petrol vehicles with
introduction of duty/price hike on diesel vehicles.
n Exports: Expect the demand momentum to be maintained and improve with addition
of Ssangyong
n Capex: Maintains capex/investment target of ~ Rs 70bn over the next three years.
Valuations
We value the company on SOTP basis and have upgraded our TP by ~6% to Rs 825 due
to clarity on fully diluted number of shares (at 614 mn shares vs our estimate of 655 mn
shares). We have assigned a value of Rs 660 to standalone business, Rs 145 to listed
subsidiaries and Rs 20 to MVML. We retain our BUY rating on the stock.
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