Operating performance beats estimates ; Maintain Neutral
Mahindra and Mahindra’s (M&M) overall results for 4QFY13 were better than our expectations with standalone EBITDA margin at 12.1% compared to our estimate of 11.1%. Combined EBITDA margins for M&M + MVML stood at 14.4% largely driven by strong performance of the FES segment despite the challenging environment. Though the tractor segment has seen demand revival for April’13 and May’13, the Auto sector has started to experience pressure with flat YTDFY14 volume growth. We continue to maintain our Neutral view on the stock with revised target price of Rs.1,023 driven by upward revision in earnings and roll forward of valuations to FY15E from earlier Sept 2014.
Key Highlights:
M&M standalone: 1.) Standalone operating income for the quarter stood at Rs.104bn registering a YoY growth of 12% (drop of 2.7% QoQ) compared to our estimate of Rs.96bn. Net Automotive realizations for the quarter stood at Rs.522,157 registering a growth of 3% YoY and 2.5% QoQ. Surprisingly, Net realizations for FES (Farm Equipments Sector) stood at Rs.574,656 registering YoY growth of 8.4% and QoQ growth of 9.4%. Driven by better than expected revenue growth, EBITDA margins for standalone operations stood at 12.1% vs. our estimate of 11.1%. EBIT margins for the Automotive segment stood at 9.8% (110bps YoY and up 131bps QoQ) and for the tractor segment 16% (up 25bps YoY and 48bps QoQ). 3.) Driven by better than expected revenue growth and operating performance, Adjusted PAT for the quarter stood at Rs.7.99bn vs. our estimate of Rs.6.6bn.
M&M + MVML: M&M + MVML combined operating income for the quarter was Rs.99.8bn (up 9.5% YoY but down 2.5% QoQ). Net Automotive realizations for the quarter stood at Rs.491,125 registering a growth of 3.1% YoY and 3.2%QoQ. Surprisingly, Net realizations for FES stood at Rs.574,656 registering a growth of 8.4% YoY and 9.4% QoQ. 2.) EBITDA margins for M&M+MVML operations stood at 14.4%. EBIT margins for the Automotive segment stood at 12.4% (171bps YoY and up 126bps QoQ) and of the tractor segment 16% (up 25bps YoY and 48bps QoQ).
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Mahindra and Mahindra’s (M&M) overall results for 4QFY13 were better than our expectations with standalone EBITDA margin at 12.1% compared to our estimate of 11.1%. Combined EBITDA margins for M&M + MVML stood at 14.4% largely driven by strong performance of the FES segment despite the challenging environment. Though the tractor segment has seen demand revival for April’13 and May’13, the Auto sector has started to experience pressure with flat YTDFY14 volume growth. We continue to maintain our Neutral view on the stock with revised target price of Rs.1,023 driven by upward revision in earnings and roll forward of valuations to FY15E from earlier Sept 2014.
Key Highlights:
M&M standalone: 1.) Standalone operating income for the quarter stood at Rs.104bn registering a YoY growth of 12% (drop of 2.7% QoQ) compared to our estimate of Rs.96bn. Net Automotive realizations for the quarter stood at Rs.522,157 registering a growth of 3% YoY and 2.5% QoQ. Surprisingly, Net realizations for FES (Farm Equipments Sector) stood at Rs.574,656 registering YoY growth of 8.4% and QoQ growth of 9.4%. Driven by better than expected revenue growth, EBITDA margins for standalone operations stood at 12.1% vs. our estimate of 11.1%. EBIT margins for the Automotive segment stood at 9.8% (110bps YoY and up 131bps QoQ) and for the tractor segment 16% (up 25bps YoY and 48bps QoQ). 3.) Driven by better than expected revenue growth and operating performance, Adjusted PAT for the quarter stood at Rs.7.99bn vs. our estimate of Rs.6.6bn.
M&M + MVML: M&M + MVML combined operating income for the quarter was Rs.99.8bn (up 9.5% YoY but down 2.5% QoQ). Net Automotive realizations for the quarter stood at Rs.491,125 registering a growth of 3.1% YoY and 3.2%QoQ. Surprisingly, Net realizations for FES stood at Rs.574,656 registering a growth of 8.4% YoY and 9.4% QoQ. 2.) EBITDA margins for M&M+MVML operations stood at 14.4%. EBIT margins for the Automotive segment stood at 12.4% (171bps YoY and up 126bps QoQ) and of the tractor segment 16% (up 25bps YoY and 48bps QoQ).
Valuations and Recommendation: At the CMP of Rs987, the stock is trading at 13.3x FY14E core EPS of Rs58.5 and 12.4x FY15E core EPS of Rs62.6. We continue to maintain our Neutral view on the stock with revised target price of Rs.1,023 driven by upward revision in earnings and roll forward of valuations to FY15E from earlier Sept 2014.
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