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Please refer to important disclosures at the end of this report 1
Y/ E Ma rch (` cr ) 1Q FY13 1Q FY12 % chg (yoy) 4 Q F Y 1 2 % chg (qoq)
N et Sales 9,3 67 6,7 27 3 9 . 2 9 , 3 8 7 ( 0 . 2 )
EBITDA 1,10 9 89 5 23.9 9 6 9 14.4
EBITDA Margin (%) 11.8 13 .3 (147)bp 10.3 152bp
Adj. PAT 72 6 60 5 2 0 . 0 8 0 6 ( 1 0 . 0 )
Source: Compa ny, A ngel Research
Mahindra and Mahindra (MM) reported better-than-expected results for
1Q FY201 3, led by the strong g rowth mo mentum in the autom otive segment. The
EBITDA margin expanded 152bp sequentially due to price increases and cost
control measures which resulted in a 14.2% qoq decline in other expenditure.Going ahead, while the tractor volumes are l ikely to remain under pressure due
to demand slowdown, we expect utility vehicles (UV) to drive the overall volumes
led by existing product portfol io and new launches (mini Xylo and Rexton). We
have scaled down our tractor volume growth for FY2013E (expected to grow at
0.5% vs 3.5% earl ier) and marginally revised upwards our automotive volumes
due to strong m om entum in the segm ent. W e m aintain our Buy rating on MM .
Strong operating performance for 1Q FY2 01 3 : MMs top-l ine grew by an
impressive 39.2% yoy (flat qoq) to ` 9,367cr driven by a strong volume growth of
14.5% yoy (flat qoq) and a robust net average realization growth of 21.9% yoy
(flat qoq). MMs automotive segment remained insulated from the demand
slowdown being witnessed in the sector, boosted by sustained momentum in the
UV (up 32% yoy) and pick-up (up 26.9% yoy) segments. Tractor volumes however,posted a decline of 1% yoy as demand continues to remain lackluster in the
segment. The EBITDA margin at 11.8% (up 152bp sequential ly) was marginally
ahead of our estimates due to a 14.2% decline in other expenditure led by cost
control init iatives. O n a y-o-y basis, the ma rgin contracted 1 47 bp d ue to raw-
material cost pressures (raw-material as a percentage of sales increased 325bp
yoy to 75.1%) and weak product-mix. Led by a better-than-expected operating
perform ance, the net profi t posted a 20 % yoy grow th to `72 6cr, which was 12.9%
ahead of o ur estimates.
O utlook and valuation: At `739, MM is trading at 13.5x FY2014E earnings. We
m aintain ou r Buy rating on the stock. O ur SOTP target price works out to ` 879 ,
wherein the companys core business fetches ` 631/share and value of i ts
investments works out to ` 248/share.
Key financials (Sta nda lone)
Y/ E Ma rch (` cr ) FY20 11 FY20 12 FY20 13 E FY2014 E
N e t Sa le s 2 3 , 4 6 0 3 1 , 8 5 4 3 6 , 5 3 6 4 1 , 6 5 0
% chg 27.8 35.8 14.7 14.0
N et Pro f it 2 ,55 0 2 ,75 3 2 ,90 2 3 ,23 2
% chg 25.7 8.0 5.4 11.4
EBITDA (%) 14 .7 11 .8 11 .6 11 .5
EPS (` ) 4 3 . 4 4 6 . 7 4 9 . 3 5 4 . 9
P/ E (x) 17 .0 15 .8 15 .0 13 .5
P/ BV (x) 4.2 3.6 3.1 2.6
RoE (%) 28 .1 24 .6 22 .1 21 .1
RoCE (%) 24 .8 21 .2 19 .9 19 .8
EV/Sales (x) 1.4 1.1 0.9 0.7
EV/EBITDA (x) 10 .5 9.6 8.1 6.8
Source: Comp any, Angel Research
BU YCM P ` 739
Target Price ` 879
Investment Period 12 M onths
Stock Info
Sector
Bloomb erg Code
Sha rehold ing Pattern (%)
Pro mo ters 2 5 .5
M F / Ba nks / Ind ian Fls 2 8 .8
FII / N RIs / O C Bs 3 7 .1
Ind ian Pub lic / O th ers 8 .6
Abs. (%) 3m 1 yr 3 yr
Sen sex 6 .9 2 .5 1 7 .0
M M 11 .7 1 .3 9 4 .9
5
17 ,558
MM@IN
Nifty
Reuters Code
5 ,320
MAHM.BO
Face Value (` )
BSE Sensex
Automobi le
Avg. Dai ly Volume
Market Cap (` cr)
Beta
52 W eek High / Low
45,352
0 .9
8 7 5 / 6 2 2
196 ,366
Net Debt (` cr) 1 ,0 55
Yaresh Kothari
022-39 35 78 00 Ext: 6844
yareshb.kothar [email protected]
M a hindra and M ahindra
Performance Highlights
1Q FY201 3 Result Update | Autom obile
August 10, 201 2
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 2
Exhibit 1:Quar terly financial performance (Standalone)Y/ E Ma rch (` cr) 1Q FY13 1Q FY12 % chg (yoy) 4 Q F Y 1 2 % chg (qoq) FY2012 FY2011 % chg (yoy)
N et Sales 9,3 67 6,7 27 3 9 . 2 9 , 3 8 7 ( 0 . 2 ) 3 1 , 8 5 4 2 3 , 4 6 0 3 5 . 8
Consumpt ion of RM 4,764 4,115 15.8 4,958 (3.9) 18,207 14 ,507 25.5(% of Sales) 50.9 61.2 52.8 57.2 61.8
Staff Co sts 45 2 40 2 12.4 4 2 9 5.2 1,702 1 ,432 18.9
(% of Sales) 4.8 6.0 4.6 5.3 6.1
Purchases of TG 2,27 1 71 9 216 2,131 7 5,293 1 ,757 201
(% of Sales) 24.2 10.7 22.7 16.6 7.5
O ther Expenses 77 1 59 6 29.3 8 9 9 (14.2) 2,881 2 ,310 24.7
(% of Sales) 8.2 8.9 9.6 9.0 9.8
Total Expenditure 8,2 58 5,8 3 2 4 1 . 6 8 , 4 1 8 ( 1 . 9 ) 2 8 , 0 8 3 2 0 , 0 0 6 4 0 . 4
O perating Profi t 1 ,1 09 89 5 2 3 . 9 9 6 9 1 4 . 4 3 , 7 7 1 3 , 4 5 4 9 .2
O PM (%) 11.8 13.3 10.3 11.8 14.7
Interest 46 26 75 7 1 (35) 1 6 3 7 2 125
Depreciat ion 155 110 40.9 1 6 0 (3.1) 5 7 6 4 1 4 39.2
O ther Income 60 55 8.7 9 6 (37.4) 4 6 6 4 3 4 7 .3
PBT (excl. Extr. Items) 9 6 8 8 1 4 1 8 . 9 8 3 4 1 6 . 1 3 , 4 9 8 3 , 4 0 2 2 .8
Extr. Incom e/ (Expense) - - - 1 0 8 - 1 0 8 1 1 7 (7.8)
PBT (incl. Extr. Item s) 9 6 8 8 1 4 1 8 . 9 9 4 3 2 .7 3 , 6 0 6 3 , 5 2 0 2 .5
(% of Sales) 10.3 12.1 10.0 11.3 15.0
Provision for Taxation 24 3 20 9 15.9 2 8 764.0 7 2 7 8 5 8 (15.2)
(% of PBT) 25.1 25.7 3.0 20 24
Reported PAT 72 6 60 5 2 0 . 0 9 1 4 ( 2 0 . 6 ) 2 , 8 7 9 2 , 6 6 2 8 .1
Adj PAT 72 6 60 5 2 0 . 0 8 0 6 ( 1 0 . 0 ) 2 , 7 7 1 2 , 5 4 5 8 .9
Adj. PATM 7.7 9.0 8.6 8.7 10.8
Equi ty capi ta l (cr ) 293 .7 293 .7 294 .2 293 .7 298 .3
Reported EPS (` ) 12 .4 10 .3 2 0 . 0 1 3 . 7 ( 9 . 8 ) 4 7 . 2 4 2 . 7 1 0 . 6
Source: Compa ny, Angel Research
Exhibit 2:1QFY2013 Actual vs Angel estimatesY/ E Ma rch (` cr) Actual Estima tes Varia tion (%)
N et Sa les 9 ,36 7 9 ,02 0 3 .9
EBITDA 1,10 9 1,0 23 8.4
EBITDA m arg in (%) 11.8 11 .3 50bp
Adj. PAT 72 6 64 3 1 2 . 9
Source: Compa ny, A ngel Research
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 3
Exhibit 3:Quarterly volume performanceVolume (uni ts) 1 Q FY13 1 Q FY12 % chg (yoy) 4 Q F Y 1 2 % chg (qoq) FY2012 FY2011 % chg (yoy)
Tota l vo lumes 18 5 ,60 7 16 2 ,14 9 1 4 . 5 1 8 6 , 8 8 1 ( 0 . 7 ) 7 1 8 , 6 9 8 5 9 0 , 7 1 6 2 1 . 7
Auto Sales - Dom estic 11 8,18 8 96 ,280 22.8 1 2 6 , 1 7 2 (6.3) 454,069 358 ,021 26.8Auto Sales - Exports 7,84 1 5,71 7 37.2 8,634 (9.2) 29,177 19 ,042 53.2
Total Auto Sales 12 6,0 29 10 1,9 97 2 3 . 6 1 3 4 , 8 0 6 ( 6 . 5 ) 4 8 3 , 2 4 6 3 7 7 , 0 6 3 2 8 . 2
Tractor Sales - Dom estic 56 ,561 57 ,244 (1.2) 48,211 17.3 221,730 201 ,785 9 .9
Tractor Sales - Exports 3,0 17 2,9 08 3 .7 3,864 (21.9) 13,722 11 ,868 15.6
Total Tractor Sales 59 ,57 8 60 ,15 2 ( 1 . 0 ) 5 2 , 0 7 5 1 4 . 4 2 3 5 , 4 5 2 2 1 3 , 6 5 3 1 0 . 2
Source: Compa ny, Angel Research
Better-than-expected growth in top-line: MM reported an impressive growth of
39.2% yoy (flat qoq) in its top-line to ` 9,387cr, driven by a strong volume growth
of 14.5% yoy (flat qoq) and robust net average realization growth of 21.9% yoy
(flat qoq). MMs automotive volumes continue to defy the general slowdown in
demand in the sector and were boosted by sustained momentum in the UV and
pick-up segments. The passenger U V and pick-up segment po sted a strong grow th
of 32% and 26.9% yoy respectively. The farm equipment segment however, posted
a 1% yoy decline in volumes as demand continues to remain lackluster in the
segm ent. While the automotive segm ent posted a robust revenue grow th of 62 .7%
yoy (down 5.1% mom); the tractor segment posted a healthy revenue growth of
7.6% yoy (11.5% qoq) led by an 8.6% yoy (down 2.6% qoq) increase in net
average realization. The net average realization in the automotive segment
witnessed a grow th of 3 1.7 % yoy (1.5% qoq ) due to increasing contribution of the
XUV5OO and price increases.
MM has lowered its tractor volume growth guidance for the industry to 0% - 2%
from 5% previously. The management has stated that the demand for the
XUV5OO continues to rema in robust with bo okings of ~ 20 ,000 units. Since its
launch, MM has sold ~ 32 ,00 0 units. The capa city for XUV5O O will be increased
to 5,000 units/month from the current level of 4,000 units/month over the next
three to six months. In the automotive segment, MM plans to launch a mini SUV,
Rexton and Reva NXRaround the festival season and the compact Verito by the
end of FY2013. In the tractors segment, MM intends to launch a new tractor and
three to fo ur refreshes going a head in FY2013 .
Exhibit 4:Volume grow th led by automotive segment
Source: Compa ny, Angel Research
Exhibit 5:Strong growth in net average realization
Source: Compa ny, A ngel Research
24.5
20.8
32.5
22.2 22.6
29.9
24.0
11.914.5
0 .0
5 .0
10.0
15.0
20.0
25.0
30.0
35.0
0
50,000
100,000
150,000
200,000
250,000
1QF
Y11
2QF
Y11
3QF
Y11
4QF
Y11
1QF
Y12
2QF
Y12
3QF
Y12
4QF
Y12
1QF
Y13
(%)(units) Tota l volum e yoy growth (RH S)
(2.7) (1.6)
2. 3 2. 85. 5 5. 9
9. 9
24.521.9
(5.0)
0. 0
5. 0
10.0
15.0
20.0
25.0
30.0
0
100,000
200,000
300,000
400,000
500,000
600,000
1Q
FY11
2Q
FY11
3Q
FY11
4Q
FY11
1Q
FY12
2Q
FY12
3Q
FY12
4Q
FY12
1Q
FY13
(%)( ` ) N et average realisation yoy growth (RH S)
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 4
Exhibit 6:Segmental performanceY/ E Ma rch (` cr) 1Q FY13 1Q FY12 % chg (yoy) 4 Q F Y 1 2 % chg (qoq) FY2012 FY2011 % chg (yoy)
Total N et Sales 9,3 74 6,7 40 3 9 . 1 9 , 3 9 4 ( 0 . 2 ) 3 1 , 8 8 0 2 3 , 4 9 7 3 5 . 7
Auto segment 6,279 3,858 62.7 6,614 (5.1) 20,101 13 ,621 47.6
Farm segment 3,078 2,861 7.6 2,761 11.5 11,690 9 ,777 19.6
O ther segments 17 21 (17.3) 2 0 (13.2) 8 9 9 8 (8.9)
Total PBIT 1,0 39 87 3 1 9 . 0 1 , 0 1 3 2 .6 3 , 6 9 9 3 , 4 3 5 7 .7
Auto segment 553 414 33.6 5 7 6 (4.0) 1,856 1 ,717 8 .1
Farm segment 482 457 5.5 4 3 4 11.1 1,833 1 ,708 7 .3
O ther segments 4.0 2.1 3.1 26.8 10.9 9 .5 14.4
PBIT/ Sales (%) 1 1 . 1 1 3 . 0 1 0 . 8 1 1 . 6 1 4 . 6
Auto segment 8.8 10 .7 (192)bp 8 .7 10bp 9.2 12 .6 (337)bp
Farm segment 15.7 16 .0 (31)bp 15.7 (5)bp 15.7 17 .5 (180)bp
O ther segments 23.5 10 .1 16 .1 12 .2 9 .7
Source: Compa ny, Angel Research
EBITDA margin improves sequentially at 11.8%: O n the operating fron t, the
EBITDA margin came in at 11.8% (up 152bp sequential ly), marginal ly ahead of
our estimates due to a 14.2% decline in other expenditure led by cost control
init iatives. Ho wever, on a y-o-y b asis, m argins contracted b y 14 7bp yoy largely on
account of increase in purchase of finished products (up 216% yoy) from the
manufacturing subsidiary - Mahindra Vehicle Manufacturers Limited (MVML).
Hence, the total raw-material cost as a percentage of sales increased 325bp yoy to
75.1%.
The EBIT margins in the automotive and farm equipment segment decl ined by
19 2b p yoy (flat qoq) and 31 bp yoy (flat qoq ) to 8.8% and 1 5.7 % respectively.
Exhibit 7:EBITDA margins at 10.8%
Source: Compa ny, Angel Research
Exhibit 8:Better- than-expected growth in bottom- line
Source: Compa ny, A ngel Research
Better-than-expected growth in bottom-line: MMs net profi t registered a better-
than-expected growth of 20% yoy to `726cr mainly due to a better-than-expected
operating performance.
15.0 16.5 15.1 12.9 13.3 12.3 12.2 10.3 11.8
70.1 68.7 69.772.2 72.9 73.1 75.3
76.7 76.1
0. 0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1Q
FY11
2Q
FY11
3Q
FY11
4Q
FY11
1Q
FY12
2Q
FY12
3Q
FY12
4Q
FY12
1Q
FY13
(%) EBITD A m argin Raw materia l cost/ sales
562 758 617 607 605 737 662 806 726
10.9
14.0
10.19. 0 9. 0
10.0
7. 98. 6
7 .7
0. 0
2. 0
4. 0
6. 0
8. 0
10.0
12.0
14.0
16.0
0
10 0
20 0
30 0
40 0
50 0
60 0
70 0
80 0
90 0
1Q
FY11
2Q
FY11
3Q
FY11
4Q
FY11
1Q
FY12
2Q
FY12
3Q
FY12
4Q
FY12
1Q
FY13
(%)(` cr) N et prof it N et prof it m argin (RH S)
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 5
Exhibit 9:Quar terly financial performance (MM + MVML)Y/ E Ma rch (` cr) 1Q FY13 1Q FY12 % chg (yoy) 4 Q F Y 1 2 % chg (qoq) FY2012 FY2011 % chg (yoy)
Net sa les 8 ,87 9 6 ,75 4 3 1 . 5 9 , 1 1 9 ( 2 . 6 ) 3 1 , 3 8 1 2 3 , 5 6 4 3 3 . 2
Total expenditure 7,6 44 5,7 88 3 2 . 1 8 , 0 1 6 ( 4 . 6 ) 2 7 , 2 2 0 1 9 , 9 4 3 3 6 . 5
Material cost 6,34 9 4,74 9 33.7 6,586 (3.6) 22,395 16 ,091 39.2
% of net sales 71.5 70.3 72.2 71.4 68.3
Emp loyee expense 48 1 42 1 14.4 4 5 5 5 .7 1,795 1 ,483 21.0
% of net sales 5.4 6.2 5.0 5.7 6.3
O ther expenses 81 3 61 8 31.5 9 7 5 (16.6) 3,031 2 ,368 28.0
% of net sales 9.2 9.2 10.7 9.7 10.1
O perat ing profi t 1 ,2 35 96 6 2 7 . 9 1 , 1 0 3 1 2 . 0 4 , 1 6 1 3 , 6 2 1 1 4 . 9
O PM (%) 13.9 14.3 12.1 13.3 15.4
Depreciat ion 180 131 37.1 2 2 6 (20.5) 6 7 0 4 7 4 41.4
EBIT 1,05 5 83 5 26.4 8 7 7 20.4 3,491 3 ,148 10.9Interest 71 53 34.1 1 1 0 (35.2) 2 8 7 1 4 8 94.5
O ther income 66 55 20.4 1 0 2 (34.8) 4 7 4 4 2 7 10.8
PBT 1 , 0 5 0 8 3 6 2 5 . 5 8 6 8 2 0 . 9 3 , 6 7 7 3 , 4 2 7 7 . 3
Exceptiona l item s - - - 1 0 8 - 1 0 8 1 1 7 -
PBT 1 ,05 0 83 6 2 5 . 5 9 7 6 7 .5 3 , 7 8 6 3 , 5 4 5 6 .8
Tax expense 27 1 21 8 24.5 6 5 317.6 7 8 9 8 5 8 (8.0)
% of PBT 25.8 26.1 6.7 20.8 24.2
Reported PAT 77 8 61 8 25 .9 91 1 (14 .6 ) 2 ,99 7 2 ,68 7 11 .5
Adj. PAT 77 8 61 8 2 5 . 9 8 0 3 ( 3 . 1 ) 2 , 8 8 9 2 , 5 7 0 1 2 . 4
Source: Compa ny, Angel Research
Strong M M + M VML performa nce: For 1Q FY20 13, the net revenues for MM +
MVML witnessed a robust growth of 31.5% yoy (down 2.6% qoq) to ` 8,879cr,
driven by a 14 .5% yoy growth in volumes (down 1% qoq) and 14 .8% yoy growth in
net average realization (down 2% qoq). The net average realizations during the
qua rter imp roved on a ccount of p rice hikes (~ 5% yoy) and superior p roduct mix
(increasing share of XUV5O O at ~ 11 ,00 0 vs ni l in 1Q FY20 12 ). The EBITDA
margin expanded by a strong 180bp qoq to 13.9% on account of a 70bp qoq
expansion in gross m argins. The gross ma rgins improved p rima ri ly due to a better
pro duct-m ix (higher contribution of tractors at 32% vs 28 % in 4Q FY20 12 ). Further
cost control initiatives (other expenditure to net sales ratio down 154bp qoq) alsocontributed to the expansion in the EBITDA margin. As a result, the operating profit
and net profi t surged 27.9% (12% qoq) and 25.9% yoy (down 3.1% qoq)
respectively during the quarter.
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 6
Investment arguments
Strong growth in the auto segment to offset slowdown in the FES segment: The outlook for tractor sales appears to be challenging given that the industry has
witnessed a slowdo wn in d ema nd o ver the pa st six mo nths. As a result, the
management has lowered its volume guidance to 0% - 2% in FY2013E from
5% earl ier. However, MMs automotive volume growth continues to surprise
positively, with a 23 .6% yoy growth in 1Q FY20 13 . Further, a strong respo nse
to the recently launched XUV500, continued momentum in the pick-up
segm ent and the launch of the new Xylo, Rextonand Reva NXRshou ld sustain
autom otive sales going ahead and som ewhat offset weak tractor dem and.
N ew ventures firm ing up well: MMs new ventures in the commercial vehicle(CV) space are firming up well. New product launches such as the G io and the
Maxximo have received a good response. Further, launch of new products in
the medium and heavy com m ercial vehicle (M&H CV) space has po sitioned the
company in line with other major domestic CV players such as Ashok Leyland
and Tata Motors. This is expected to substantially augment the companys
overal l volume growth, supported by i ts well-known brand equity and
extensive sales network.
Investments constitute ~ 6 5 % of the ba lance sheet: MM also has majoritystakes in various listed companies in other sectors, including technology,
property and finance. The high-growth potential of MM's subsidiaries is
expected to unlock the actual value of the stock over the years. Listing of its
subsidiaries has been supporting the companys valuation in the recent pastand ma y continue to do so in the long term as well .
Outlook and valuation
G oing a head, w hile the tractor volum es are l ikely to rem ain un der p ressure due to
demand slowdown, we expect utility vehicles (UV) to drive the overall volumes led
by existing product portfol io and new launches (mini Xylo and Rexton). We have
scaled dow n o ur tractor volum e grow th for FY20 13 E (expected to g row a t 0.5% vs
3.5% earl ier) and marginally revised upwards our automotive volumes due to
strong mo mentum in the segm ent. Further, we ha ve revised upw ards our operating
margin estimates to factor in the resiliency shown by the tractor segment in
1Q FY201 3. M M s policy of no t offering discounts despite dema nd pressures led to
stable performance in the tractor segment. As a result, our earnings estimates for
FY201 3/ 14 stand revised upwa rds by 3.7%/ 3.2 % to ` 49.3/ 54 .9 .
Exhibit 10:Change in estimatesY/ E M a rch Earlier Estima tes Revised Estima tes % chg
FY20 13 E FY20 14 E FY201 3E FY201 4E FY20 13 E FY20 14 E
N et Sa les (` cr ) 3 5 , 8 8 1 4 0 , 7 4 6 3 6 , 5 3 6 4 1 , 6 5 0 1 . 8 2 . 2
O PM (%) 10.0 10 .0 11 .6 11 .5 160bp 145bp
EPS (` ) 4 7 . 5 5 3 . 2 4 9 . 3 5 4 . 9 3 . 7 3 . 2
Source: Compa ny, A ngel Research
At ` 739, MM is t rading at 13.5x FY2014E earnings. We maintain our Buy rating
on the stock. O ur SO TP target pr ice wo rks out to ` 879, wherein its core business
fetches `63 1/ sha re and valu e of its investmen ts wor ks ou t to ` 248/share.
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 7
Exhibit 11:SOTP valuationKey Subsidiary
N o. of Shares(cr)
C M P(` )
Value(` cr)
Ma hindra Financial Services 5.8 78 2 4,55 0
Ma hindra Lifespace Developers 2.1 35 7 74 3
Tech Mahindra 6.1 800 4,845
Mahindra Forgings 4.9 56 271
Ma hindra Holidays and Resorts 7.0 29 3 2,05 1
Ma hindra Ugine Steel 1.6 47 78
O ther Investmen ts (at boo k value) 8,3 06
Total value (` cr) 20,843
Shares outstand ing (cr) 58 .9
Per share value of investments (30 % discount) 2 4 8
M M 's Co re Business/ share value (11 .5 x FY14 E EPS) 6 3 1
M M 's Target Price with investm ents ( ) 879
Source: Compa ny, A ngel Research
Exhibit 12:Key assumptionsY/E Ma rch (uni ts) FY20 09 FY20 10 FY20 11 FY20 12 FY20 13 E FY20 14 E
Passenger Ut il i ty Vehicles (UV) 214 ,128 150 ,726 169 ,205 202 ,276 242 ,731 271 ,859
4-whee le r p i ck -up - 76 ,387 105 ,588 152 ,691 177 ,122 203 ,690
LCV 9 ,792 9 ,829 11 ,077 13 ,823 15 ,896 18 ,281
Logan 5 ,332 5 ,332 10 ,009 17 ,839 21 ,407 24 ,618
Three wheelers 57,42 4 44,43 9 62,14 2 67,44 0 68,11 4 71,52 0
Expor ts 10 ,815 11 ,567 19 ,042 29 ,177 36 ,471 43 ,766
Tota l Automotive Sa les 29 7 ,49 1 29 8 ,28 0 37 7 ,06 3 48 3 ,24 6 56 1 ,74 2 63 3 ,73 3
Dom est ic Tractor Sales 165 ,581 165 ,633 201 ,785 221 ,730 221 ,730 237 ,251
Expor ts Tractor Sales 8,999 9,001 11,86 8 13,72 2 14,82 0 16,30 2
T ota l Tr a cto r Sa l es 1 7 4 , 5 8 0 1 7 4 , 6 3 4 2 1 3 , 6 5 3 2 3 5 , 4 5 2 2 3 6 , 5 5 0 2 5 3 , 5 5 3
T ota l Vo lu m e 4 7 2 , 0 7 1 4 7 2 , 9 1 4 5 9 0 , 7 1 6 7 1 8 , 6 9 8 7 9 8 , 2 9 1 8 8 7 , 2 8 6
Source: Compa ny, Angel Research
Exhibit 13:Angel vs. consensus forecastAnge l estima tes Co nsensus Variation (%)
FY13E FY14E FY13E FY14E FY13E FY14E
Total op. incom e (` c r ) 3 6 , 5 3 6 4 1 , 6 5 0 3 6 , 9 7 9 4 2 , 0 8 0 ( 1 . 2 ) ( 1 . 0 )
EPS (` ) 49 .3 54 .9 48 .9 55 .7 0.8 (1.5)
Source: Bloomberg, Angel Research
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Mahindra and Mah indra | 1Q FY20 13 Result Upda te
August 10, 20 12 8
Exhibit 14:One-year fo rward P/ E chart
Source: Compa ny, Angel Research
Exhibit 15:Premium/ Discount to Sensex P/ E
Source: Compa ny, A ngel Research
Exhibit 16:Automobile - Recommendation summaryCompany Reco.
C M P(` )
Tgt. price(` )
Upside(%)
P/ E (x) EV/ EBITDA (x) RoE (%) FY12-14E EPS
FY13 E FY14 E FY13 E FY1 4 E FY1 3 E FY14 E CAG R (%)
Ashok Leyland Buy 23 30 31.7 10.5 8 .4 5 .4 4 .6 13 .3 15 .6 14.1
Bajaj Auto Neutral 1,68 0 - - 15.5 13 .8 10 .4 8 .8 46 .1 41 .3 6 .7
Hero MotoCorp Buy 1,914 2,428 26.8 13.7 12 .6 7 .9 6 .7 54 .6 44 .3 12.9
Maruti Suzuki Accumulate 1,16 4 1,22 7 5 .4 17.4 13 .3 10 .5 7 .1 12 .1 14 .1 24.5
Ma hindra &Mahindra
Buy 73 9 87 9 1 9 . 0 1 5 . 0 1 3 . 5 8 . 1 6 . 8 2 2 . 1 2 1 . 1 8 .4
Tata Motors Buy 23 2 29 2 25.7 6.0 5 .3 3 .3 2 .9 32 .6 28 .2 10.3
TVS Motor Accumulate 39 43 9 .1 8.0 7 .3 3 .5 3 .1 18 .8 18 .1 1 .2
Source: Compa ny, Angel Research
Company background
Mahindra and Mahindra, a f lagship company of the Mahindra Group, is the
largest manufacturer of UV and tractors in India wi th a ~ 52% and ~ 42% ma rket
share respectively. The company is also the second largest player in the LCV
spa ce, with a ~ 33 % m arket share. MM is also the only com pany in India that is
present across all the automotive segments. MM has an installed capacity of 6lakhand 2.3lakh units/year in the automotive and farm equipment segments
respectively. In FY2011, MM acquired a 70% stake in Ssangyong Motor Co.
(SYMC), transforming itself into a global UV player. Apart from the core auto
business, the company has subsidiaries/associates in various businesses such as IT,
NBFC, auto ancillaries, hospitality and infrastructure.
0. 0
5. 0
10.0
15.0
20.0
25.0
30.0
Apr-02
Jan-03
Nov-03
Aug-04
Jun-05
M
ar-06
Jan-07
O
ct-07
Aug-08
M
ay-09
M
ar-10
Dec-10
O
ct-11
Jul-12
(x) Absolute P/ E Five-yr average P/ E
(80.0)
(60.0)
(40.0)
(20.0)
0. 0
20.0
40.0
60.0
Apr-02
Jan-03
Nov-03
Aug-04
Jun-05
M
ar-06
Jan-07
O
ct-07
Aug-08
M
ay-09
M
ar-10
Dec-10
O
ct-11
Jul-12
(%) Abso lu te prem ium Five-yr average prem ium
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Prof it and loss statement (Standalone)
Y/ E Ma rch (` cr ) FY20 09 FY2010 FY20 11 FY20 12 FY2013 E FY20 14 E
Tota l opera t ing income 12 ,927 18 ,363 23 ,460 31 ,854 36 ,536 41 ,650
% chg 14.6 42.1 27.8 35.8 14.7 14.0 Tota l expend itu re 12 ,035 15 ,647 20 ,006 28 ,083 32 ,298 36 ,881
Net raw mater ia l costs 9,274 12,34 6 16,26 4 23,50 0 27 ,110 30,94 6
O ther mfg costs 311 379 444 553 639 750
Employee expenses 1,018 1,190 1,432 1,702 1,936 2,207
O ther 1 ,431 1 ,732 1 ,866 2 ,328 2 ,612 2 ,978
EBI TD A 8 9 2 2 , 7 1 6 3 , 4 5 4 3 , 7 7 1 4 , 2 3 8 4 , 7 6 9
% chg (18.5) 204.5 27.2 9.2 12.4 12.5
(% of total op. income) 6.9 14.8 14.7 11.8 11.6 11.5
Depreciat ion & amort izat ion 292 371 414 576 763 866
EBI T 6 0 0 2 , 3 4 5 3 , 0 4 0 3 , 1 9 5 3 , 4 7 5 3 , 9 0 3
% chg (29.8) 290.6 29.6 5 .1 8 .8 12 .3
(% of total op. income) 4.6 1 2.8 1 3.0 10 .0 9.5 9.4
Interest and other charges 134 157 72 163 190 190
O ther i ncome 601 658 552 574 586 597
Recurr ing PBT 1 ,06 7 2 ,84 7 3 ,52 0 3 ,60 6 3 ,87 0 4 ,30 9
% chg (24.1) 166.7 23.6 2.5 7.3 11.4
Extrao rdina ry incom e/ (expense) (81) (59) (113 ) (126 ) - -
PBT 9 8 6 2 , 7 8 8 3 , 4 0 7 3 , 4 8 0 3 , 8 7 0 4 , 3 0 9
Tax 200 759 858 727 967 1 ,077
(% of PBT) 20.3 27.2 25.2 20.9 25.0 25.0
PAT (r eported ) 86 8 2 ,08 8 2 ,66 2 2 ,87 9 2 ,90 2 3 ,23 2
A D J. PA T 7 8 6 2 , 0 2 9 2 , 5 5 0 2 , 7 5 3 2 , 9 0 2 3 , 2 3 2
% chg (17.0) 158.1 25.7 8.0 5.4 11.4
(% of tota l op. income) 6.1 11 .0 10 .9 8 .6 7 .9 7 .8
Ba sic EPS (` ) 1 5 . 9 3 6 . 9 4 5 . 3 4 8 . 9 4 9 . 3 5 4 . 9
Adj. EPS (` ) 1 4 . 4 3 5 . 9 4 3 . 4 4 6 . 7 4 9 . 3 5 4 . 9
% chg (27.2) 148.7 21.1 7.7 5.4 11.4
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Balance sheet statement (Standalone)
Y/ E Ma rch (` cr ) FY20 09 FY20 10 FY20 11 FY2012 FY2013 E FY20 14 E
SOU RCES O F FUN DS
Equi ty share capi ta l 273 283 294 295 295 295Reserves & surp lus 4,989 7,544 10,02 0 11,81 0 13,84 0 16,18 2
Shareho lders Funds 5 ,26 2 7 ,82 7 10 ,313 12 ,105 14 ,134 16 ,476
Total loans 4,053 2,880 2,321 3,174 3,174 3,174
Deferred tax l iab i l i ty (18) 240 354 527 527 527
O ther long term l iab i l i ties - - 187 197 197 197
Long term provisions - - 421 483 483 483
Tota l Liab i li ties 9 ,29 7 10 ,947 13 ,598 16 ,486 18 ,515 20 ,857
APPLICATIO N O F FUN DS
Gross b lock 4 ,894 5 ,276 5 ,971 7 ,838 9 ,089 10 ,312
Less: Acc. depreciation 2,326 2,538 2,838 3,552 4,316 5,182
N e t Blo ck 2 , 5 6 8 2 , 7 3 9 3 , 1 3 3 4 , 2 8 6 4 , 7 7 3 5 , 1 3 0
Capi ta l work- in-progress 647 9 64 77 4 795 1,000 1,134
Investments 5,786 6,398 8,926 10,31 0 11,10 9 12,51 4
Long term loans and advances - - 1,868 1 ,477 1 ,477 1 ,477
O ther noncurrent assets - - 1 1 7 3 6 3 6 3 6
Current assets 5,081 6,047 4,722 6,941 7,536 8,734
Cash 1 ,574 1 ,743 615 1 ,188 1 ,333 1 ,661
Loans & advances 1,402 1,856 1,153 1,406 1,644 1,874
Other 2 ,104 2 ,447 2 ,955 4 ,347 4 ,559 5 ,199
Current l iab il i ties 4,798 5,200 5,942 7,360 7,415 8,169
N et current assets 28 3 84 7 (1,22 0) (419 ) 12 1 56 5
Misc. exp. not written off 13 - - - - -
Tota l Assets 9 ,29 7 10 ,947 13 ,598 16 ,486 18 ,515 20 ,857
Source: Compa ny, A ngel Research
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Cash flow statement (Standalone)
Y/ E Ma rch (` cr ) FY20 09 FY20 10 FY20 11 FY2012 FY2013 E FY20 14 E
Prof it before tax 986 2,788 3,407 3,480 3,870 4,309
Deprecia ti on 292 371 414 576 763 866Change in work ing capi ta l 834 (394 ) 938 (228 ) (428 ) (167 )
O thers 320 990 (370) 207 - -
O ther income (601) (658) (552) (574) (586) (597)
Direct taxes paid (200) (759) (858) (727) (967) (1,077 )
Cash F low f rom O pera tions 1 ,63 1 2 ,33 7 2 ,98 0 2 ,73 5 2 ,65 2 3 ,33 4
(Inc.)/ Dec. in f ixed assets (1,338 ) (700) (505) (1,888 ) (1,455 ) (1,359 )
(Inc.)/ Dec. in investments (1,571 ) (612) (2,528 ) (1,385 ) (799) (1,405 )
O ther i ncome 601 658 552 574 586 597
Ca sh Flow f rom Invest ing (2,30 8) (653 ) (2,48 0) (2,69 9) (1,66 8) (2,16 7)
Issue of equity 1 71 9 1,00 6 24 - -
Inc./ (Dec.) in loans 1,46 6 (1,173 ) (559) 85 3 - -
Div idend paid ( Inc l. Tax) 321 312 624 803 839 839
O thers (398) (1,373 ) (2,698 ) (1,142 ) - -
Ca sh Flow f rom Financing 1,3 90 (1,51 5) (1,62 8) 53 8 (839 ) (839 )
Inc./ (Dec.) in cash 713 169 (1,129 ) 574 144 328
O p e nin g C a sh b a la n ce s 8 6 1 1 , 5 7 4 1 , 7 4 3 6 1 5 1 , 1 8 8 1 , 3 3 3
C losing Cash ba lances 1 ,57 4 1 ,74 3 61 5 1 ,18 8 1 ,33 3 1 ,66 1
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Key ratios
Y/E M ar ch FY20 09 FY20 10 FY20 11 FY20 12 FY20 13 E FY2014 E
Valuation Ratio (x)
P/ E (on FDEPS) 51 .2 20 .6 17 .0 15 .8 15 .0 13 .5P/ CEPS 34.7 17.4 14.6 13.1 11.9 10.6
P/ BV 7.7 5.3 4.2 3.6 3.1 2.6
Dividend yield (%) 0.7 1.3 1.6 1.8 1.7 1.7
EV/Sales 2.8 1.9 1.4 1.1 0.9 0.7
EV/EBITDA 44 .9 14 .0 10 .5 9.6 8.1 6.8
EV / Total Assets 4.3 3.5 2.7 2.1 1.9 1.6
Per Sha re Da ta (` )
EPS (Basic) 15 .9 36 .9 45 .3 48 .9 49 .3 54 .9
EPS (ful ly di luted) 14 .4 35 .9 43 .4 46 .7 49.3 5 4.9
Cash EPS 21.3 42.4 50.5 56.5 62.2 69.6
DPS 5.1 9.7 12.0 13.0 12.5 12.5
Book Value 96.3 138 .1 175 .4 205 .3 239 .8 279 .5
Dupont Analysis
EBIT margin 4.6 12.8 13.0 10.0 9.5 9.4
Tax retention rat io 0.8 0.7 0.7 0.8 0.8 0.8
Asset turnover (x) 1.9 2.2 2.1 2.3 2.3 2.3
RO IC (Post-tax) 6.9 20 .2 20 .5 17 .9 16 .1 16 .1
Cost of Debt (Post Tax) 3.2 3.3 2.1 4.7 4.5 4.5
Leverage (x) 0.0 0.0 0.0 0.0 0.0 0.0
O perating RO E 6.9 20.2 20.5 17.9 16.1 27.7
Returns (%)
RO CE (Pre-tax) 7.4 23 .2 24 .8 21 .2 19 .9 19 .8
Angel RO IC (Pre-tax) 6.3 18 .7 17 .7 16 .7 1 5.2 15 .3
RO E 16.4 31.0 28.1 24.6 22.1 21.1
Turnover ratios (x)
Asset Turnover (Gro ss Block) 3.0 3.6 4.2 4.6 4.3 4.3
Inventory / Sales (days) 30 22 22 23 25 25
Receivables (days) 29 23 20 19 19 19
Payables (days) 82 69 63 61 61 60
WC cycle (ex-cash) (days) (25) (22) (21) (20) (14) (10)
Solvency ratios (x)N et debt to equity (0.6) (0.7) (0.7) (0.7) (0.7) (0.7)
N et debt to EBITDA (3.7) (1.9) (2.1) (2.2) (2.2) (2.3)
Interest Coverage (EBIT / Int.) 4.5 15 .0 41 .9 19 .6 18 .2 20 .5
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Disclosure of Interest Statement Mahindra and Mahindra
1. Analyst ownership of the stock N o
2. Angel and its G roup comp anies ownership of the stock N o
3. Angel and its G roup comp anies' Directors ownership of the stock N o
4. Broking relationship with comp any covered N o
Rating s (Returns): Buy (> 15%) Accumulate (5% to 15%) N eutral (-5 to 5%)Reduce (-5% to 1 5%) Sell (< -1 5 %)
N ote: We have not considered a ny Exposure below`
1 lakh for Ang el, i ts Group companies and Directors