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S l u g g i s h t r a c t o r g r o w t h p l a y s s p o i l s p o r t …
Mahindra and Mahindra (M&M) reported a mixed set of Q3FY12 numbers.
The topline came above our estimates at | 8,327.2 crore (I-direct
estimate: | 8058.7 crore) reflecting a jump of 37.1% YoY driven by robust
revenue growth in the automotive (up 47.4% YoY) and FES segment (up
23.2% YoY). The realisation improved ~10% QoQ in the automotive
segment on account of price hikes of ~1-2% taken during October
coupled with a better product mix. The EBITDA margin contracted to
12.3% (a fall of 295 bps YoY) due to commodity pressures and only
partial pass on of higher RM cost due to weak demand sentiments. The
other expenses declined 4.7% QoQ due to reversal of forex charge of |
39.86 crore. PAT came lower at | 662.1 crore (I-direct estimate: | 676.2
crore) reflecting a dip of 9.8% YoY and 10.2% QoQ.
Highlights of the quarter
The management’s frail demand outlook on the tractor industry concurs
with our expectations with FY13E growth expected to be muted at ~8-
10% on the assumption of decent monsoons. Tractor sales were up
12.2% YoY during Q3FY12. However, in the UV space, the demand
scenario remains robust (up 31.3% YoY) with demand exceeding supply
for models like XUV 500 and Scorpio sales witnessing strong sales
growth as cannibalisation fears remain unfounded. The management has
given a capex guidance of | 5,600 crore in M&M and MVML in the next
three years and plans to spend | 2,000 in the form of investments.
V a l u a t i o n
We maintain our optimistic outlook on volume growth in the LCV and UV
segments and expect a ramp-up in production to further aid topline
growth. However, we remain cautious on the growth prospects of the
FES segment and have factored in muted (~5%) growth in FY13E. Also,
M&M’s standalone margins are expected to remain under pressure. At the
CMP of | 690, the stock is trading at 13.8x FY13E EPS of | 49.8. We have
valued M&M on an SOTP basis with the standalone business valued at a
price of | 462/share and subsidiaries (listed/unlisted) valued at
| 252/share. We have arrived at a target price of | 714. We maintain our
HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PDF link for report- click here
S l u g g i s h t r a c t o r g r o w t h p l a y s s p o i l s p o r t …
Mahindra and Mahindra (M&M) reported a mixed set of Q3FY12 numbers.
The topline came above our estimates at | 8,327.2 crore (I-direct
estimate: | 8058.7 crore) reflecting a jump of 37.1% YoY driven by robust
revenue growth in the automotive (up 47.4% YoY) and FES segment (up
23.2% YoY). The realisation improved ~10% QoQ in the automotive
segment on account of price hikes of ~1-2% taken during October
coupled with a better product mix. The EBITDA margin contracted to
12.3% (a fall of 295 bps YoY) due to commodity pressures and only
partial pass on of higher RM cost due to weak demand sentiments. The
other expenses declined 4.7% QoQ due to reversal of forex charge of |
39.86 crore. PAT came lower at | 662.1 crore (I-direct estimate: | 676.2
crore) reflecting a dip of 9.8% YoY and 10.2% QoQ.
Highlights of the quarter
The management’s frail demand outlook on the tractor industry concurs
with our expectations with FY13E growth expected to be muted at ~8-
10% on the assumption of decent monsoons. Tractor sales were up
12.2% YoY during Q3FY12. However, in the UV space, the demand
scenario remains robust (up 31.3% YoY) with demand exceeding supply
for models like XUV 500 and Scorpio sales witnessing strong sales
growth as cannibalisation fears remain unfounded. The management has
given a capex guidance of | 5,600 crore in M&M and MVML in the next
three years and plans to spend | 2,000 in the form of investments.
V a l u a t i o n
We maintain our optimistic outlook on volume growth in the LCV and UV
segments and expect a ramp-up in production to further aid topline
growth. However, we remain cautious on the growth prospects of the
FES segment and have factored in muted (~5%) growth in FY13E. Also,
M&M’s standalone margins are expected to remain under pressure. At the
CMP of | 690, the stock is trading at 13.8x FY13E EPS of | 49.8. We have
valued M&M on an SOTP basis with the standalone business valued at a
price of | 462/share and subsidiaries (listed/unlisted) valued at
| 252/share. We have arrived at a target price of | 714. We maintain our
HOLD rating on the stock.
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