Beruflich Dokumente
Kultur Dokumente
August 8, 2011
BUY
CMP Target Price `666 `815
12 Months Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Automobile 40,891 1.2 826/550 203,095 5 16,990 5,119 MAHM.BO MM@IN
Mahindra and Mahindra (M&M) registered an in-line performance for 1QFY2012, led by sustained volume momentum and increased average net realisation. Operating margin declined slightly due to raw-material cost pressures and withdrawal of tax incentives at MVML. As a result, net profit was marginally lower than our estimates. We largely retain our volume, revenue and earnings estimates for M&M and maintain our Buy view on the stock. Strong top-line performance, but margin contraction restricts bottom-line growth: M&M reported a strong revenue performance for 1QFY2012, led by robust 22.6% yoy (down 2.9% qoq) growth in volumes and 6.2% yoy (2.9% qoq) growth in net average realisation due to change in product mix and price hikes. Strong volume performance in the automotive segment (24.2% yoy) and farm equipment segment (19.9% yoy) resulted in market share gains for M&M. EBITDA margin, however, came in marginally lower than our estimates at 13.3%, down 170bp yoy (up 61bp qoq), largely due to raw-material cost pressures, increased purchases from MVML and withdrawal of tax incentives at MVML. However, cost rationalisation measures coupled with lower staff cost and other expenses provided some respite. As a result, net profit for the quarter grew modestly by 7.6% yoy (flat qoq) to `605cr. Outlook and valuation: M&Ms passenger utility vehicle (UV), four-wheeler pick-up and tractor volumes continued to surprise positively despite a challenging macroeconomic environment. We maintain our volume assumptions and have modeled a ~12% CAGR in passenger UV and four-wheeler pick-up volumes over FY201113E and a ~13% CAGR in tractor volumes over the same period. We expect M&M to leverage upon its dominant position in the UV and tractor segments and believe that strong rural demand will help M&M sustain its volume momentum. We retain our Buy view on M&M, valuing it on SOTP basis. Our SOTP target price for the stock works out to `815, wherein its core business fetches `622/share and the value of its investments works out to `193/share. Key financials
Y/E March (` cr) Net sales % chg Adj. net profit % chg EBITDA margin (%) Adj. EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 24.9 32.8 33.8 8.5
3m (8.3) (6.5)
1yr (6.4)
3yr 12.0
2.6 132.0
FY2010 18,363 42.1 2,029 158.1 14.8 35.9 18.6 4.8 31.0 23.2 1.7 12.5
FY2011 23,044 25.5 2,537 25.0 13.0 43.2 15.4 3.8 28.0 21.6 1.3 10.5
FY2012E 27,108 17.6 2,779 9.6 12.7 47.3 14.1 3.3 25.2 21.5 1.1 9.2
FY2013E 30,880 13.9 3,042 9.4 12.6 51.8 12.9 2.8 23.6 21.8 0.9 8.1
Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com
1QFY12 6,734 4,115 61.1 403 6.0 719 10.7 599 8.9 5,836 897 13.3 (2.0) 110 25 814 814 12.1 209 26 605 9.0 293.7 10.3
1QFY11 5,160 3,322 64.4 314 6.1 268 5.2 480 9.3 4,385 776 15.0 (22.7) 98 20 721 721 14.0 159 22 562 10.9 283.1 9.9
% chg 30.5 23.9 28.6 168 24.7 33.1 15.7 (91) 12.6 21.4 12.9 12.9 31.9 7.6
FY2011 23,494 14,507 61.7 1,446 6.2 1,757 7.5 2,328 9.9 20,037 3,456 14.7 (50.3) 414 310 3,402 117.5 3,520 15.0 858 24 2,662 11.3 293.6
FY2010 18,602 11,672 62.7 1,198 6.4 661 3.6 2,115 11.4 15,647 2,955 15.9 27.8 371 199 2,756 91 2,847 15.3 759 27 2,088 11.2 283.0 36.9
% chg 26.3 24.3 20.6 166 10.0 28.1 17.0 (281) 11.6 55.3 23.4 23.6 13.0 27.5
3.7
45.3
22.9
August 8, 2011
Net sales up 30.5% yoy on strong volume growth: For 1QFY2012, M&M reported net sales of `6,734cr, up by strong 30.5% yoy (down 0.7% qoq). Growth was aided by robust 22.6% yoy (down 2.9% qoq) growth in total volumes and 6.2% yoy (2.9% qoq) increase in average net realisation, led by better product mix and price hikes. Volume growth in the automotive and farm equipment segments maintained its strong momentum, registering 24.2% and 19.9% yoy growth, respectively. In the passenger UV segment, M&M posted 14.3% yoy growth to 44,407 vehicles, retaining its dominant position with a market share of 56.2% as Xylo, Scorpio and Bolero continued to see good offtake. Domestic tractor volumes also registered strong 20% yoy growth, outperforming the industrys growth of 13.7% yoy. As a result of the outperformance, M&Ms market share in the domestic tractors market grew significantly to 43% as compared to 40.7% in 1QFY2011.
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
August 8, 2011
1QFY12
Segmental performance: The automotive and farm equipment segments reported a strong revenue performance, with the automotive segment registering growth of 34% yoy to `3,858cr, driven by strong passenger UV and four-wheeler pick-up sales. Scorpio, Bolero, Gio and Maximo continued to drive the performance in the automotive segment. The farm equipment segment grew by 25.8% yoy to `2,861cr on account of strong performance by Mahindra and Swaraj divisions. While the automotive segments EBIT declined by 150bp yoy to 10.7% (10.6% in 4QFY2011) due to raw-material cost pressures and ramp-up in volumes at MVML, the farm equipment segments EBIT margin declined by 114bp yoy to 16%. Margin continues to be under pressure, down 170bp yoy: M&Ms EBITDA margin for 1QFY2012 came in 43bp below our estimate at 13.3%, posting a contraction of 170bp yoy (up 61bp qoq). The margin decline can be attributed to increased purchase of finished products from the companys manufacturing subsidiary, Mahindra Vehicle Manufacturers Limited (MVML), withdrawal of tax incentives at MVML and raw-material cost pressures. Raw-material costs for the quarter increased by 236bp yoy and 77bp on a qoq basis to 72.4% of sales. However, cost-rationalisation measures coupled with an 8bp and 39bp yoy decline in staff cost and other expenses, respectively, provided some respite on the margin front. Including MVML operations, operating margin stood at 14.2% as against 13.3% for standalone operations. During the quarter, M&M incurred an additional charge of `26.5cr towards amortisation of employee stock options granted in the previous years. Adjusting for the additional charge, operating margin stood at 13.7% for the quarter.
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
Net profit at `605cr, up 7.6% yoy: Net profit for the quarter reported 7.6% yoy (flat qoq) growth to `605cr, 5% lower than our estimate, primarily due to higher tax rate and interest expense and lower other income. Interest cost increased on account of increased borrowings. Other income grew by 21.4% yoy `25cr.
August 8, 2011
1QFY12
August 8, 2011
Investment arguments
Strong growth continues in core business: M&Ms UV and tractor volume growth continues to surprise positively, with 25% (24%) overall growth reported in FY2011. Xylo, Scorpio and Bolero contributed to robust UV volume growth in FY2011. M&M has also performed well above our expectations in its farm equipment segment. We expect M&M to perform better than the competition in the UV and the tractor space. Thus, we have modeled a ~12% and ~13% CAGR in auto and farm equipment volumes over FY201113E, respectively. New ventures firming up well: M&Ms new ventures in the CV space are firming up well. New product launches such as GIO and Maxximo have received good response. Further, launch of new products in the M&HCV space would position the company well, in-line with other major domestic CV players such as Ashok Leyland and Tata Motors over the next 23 years, aided by its well-known brand equity and extensive sales network. This is expected to substantially augment the companys overall volume growth. Systech operations poised to benefit from the rebound: Systech should be a key beneficiary of the growing trend of component sourcing from lower-cost countries, given its existing relationships with global OEMs. Systechs management is focused on creating shareholder value and has set a goal of achieving `500cr600cr in EBITDA, with 75% coming from Europe and the rest from India. Management believes this is achievable even at 30% below peak levels. We believe these moves will start contributing positively to M&M's consolidated EPS, when the global industry cycle takes a positive turn. Investments constitute 71% of the balance sheet: M&M also has majority stakes in various listed companies in other sectors, including technology, property and finance. The high-growth potential of M&M's subsidiaries is expected to unlock the actual value of the stock over the years. Listing of its subsidiaries has been supporting M&M's valuation in the recent past and may continue to do so in the long term as well.
August 8, 2011
Value (` cr) 3,559 530 3,820 275 2,527 79 5,479 16,269 58.7 193 622 815
FY08 148,761 10,398 25,891 33,927 25,657 244,634 90,037 8,677 98,714 343,348
FY09 153,655 8,604 13,983 44,533 8,500 229,275 113,302 6,406 119,708 348,983
FY10 150,726 76,387 9,829 5,332 44,439 11,567 298,280 165,633 9,001 174,634 472,914
FY11 169,205 105,588 11,077 10,009 62,142 19,042 377,063 201,785 11,868 213,653 590,716
FY12E 191,202 122,482 11,409 15,014 67,113 24,755 431,975 230,035 13,055 243,090 675,064
FY13E 210,322 134,730 11,752 16,515 72,482 29,706 475,506 257,639 14,621 272,260 747,767
Dec-04
Jun-04
Jan-06
Jun-10
Aug-06
Mar-07
Apr-02
Oct-02
Nov-03
Apr-08
Oct-08
Nov-09
Sep-07
Jan-11
Jul-05
May-03
May-09
Jul-11
Dec-04
Jun-04
Jan-06
Jun-10
Aug-06
Mar-07
Apr-02
Nov-03
Apr-08
Nov-09
Oct-02
Sep-07
Oct-08
Jan-11
Jul-05
May-03
August 8, 2011
May-09
Jul-11
August 8, 2011
August 8, 2011
Balance Sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 3,656 1,842 1,814 546 4,215 3,644 861 694 2,089 3,240 404 14 6,994 4,894 2,326 2,568 647 5,786 5,081 1,574 1,402 2,104 4,798 283 13 9,297 5,276 2,538 2,739 964 6,398 6,047 1,743 1,856 2,447 5,200 847 10,947 6,228 2,842 3,386 986 9,325 6,143 615 2,480 3,049 6,768 (624) 13,073 7,821 3,350 4,471 626 9,561 6,716 527 2,711 3,478 7,103 (388) 14,270 8,790 3,921 4,869 703 10,040 8,399 1,350 3,088 3,962 7,817 583 16,195 239 4,111 4,350 2,587 57 6,994 273 4,989 5,262 4,053 (18) 9,297 283 7,544 7,827 2,880 240 10,947 294 10,020 10,313 2,405 354 13,073 294 11,416 11,710 2,205 354 14,270 294 13,741 14,034 1,805 354 16,195 FY08 FY09 FY10 FY11 FY12E FY13E
August 8, 2011
10
170 (1,248) 254 (1,285) 759 2,316 (700) (646) 658 10 312 (3) (848) 1,574 1,743 858 2,988
(612) (2,927)
169 (1,129)
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Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) RoIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT/Interest) (0.6) (2.3) 9.8 (0.6) (3.7) 4.5 (0.7) (1.9) 15.0 (0.7) (2.5) 36.6 (0.7) (2.3) (66.7) (0.7) (2.5) (92.1) 3.3 32 28 69 (11) 3.0 30 29 82 (25) 3.6 22 23 69 (22) 4.0 23 21 65 (17) 3.9 24 21 67 (14) 3.7 24 21 69 (10) 14.0 11.0 24.0 7.4 6.3 16.4 23.2 18.7 31.0 21.6 15.8 28.0 21.5 15.9 25.2 21.8 16.6 23.6 7.6 0.8 2.3 13.0 3.1 13.0 4.6 0.8 1.9 6.9 3.2 6.9 12.8 0.7 2.2 20.2 3.3 20.2 11.3 0.7 2.1 17.9 2.0 17.9 10.9 0.7 2.1 16.6 (1.4) 16.6 10.8 0.7 2.2 17.2 (1.3) 17.2 23.1 19.8 28.1 5.9 90.7 15.9 14.4 21.3 5.1 36.9 35.9 42.4 9.7 45.3 43.2 50.2 12.0 175.4 47.3 47.3 56.0 10.0 199.2 51.8 51.8 61.5 10.0 238.8 33.6 23.7 7.3 0.9 2.8 33.5 5.2 46.2 31.3 6.9 0.8 2.5 40.1 3.9 18.6 15.7 4.8 1.5 1.7 12.5 3.1 15.4 13.3 3.8 1.8 1.3 10.5 2.4 14.1 11.9 3.3 1.5 1.1 9.2 2.2 12.9 10.8 2.8 1.5 0.9 8.1 1.8 FY08 FY09 FY10 FY11 FY12E FY13E
96.3 138.1
August 8, 2011
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E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
M&M No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
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