mm 1qfy2013 ru

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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


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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


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


Exhibit 5:Strong growth in net average realization


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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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


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%


Exhibit 8:Better- than-expected growth in bottom- line


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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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


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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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


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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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


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


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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August 10, 20 12 8

Exhibit 14:One-year fo rward P/ E chart


Exhibit 15:Premium/ Discount to Sensex P/ E


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


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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August 10, 20 12 9

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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August 10, 20 12 10

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


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August 10, 20 12 11

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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August 10, 20 12 12

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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A t 10 20 12 13

Research Team Tel: 02 2 - 39 35 78 00 E-m ail: research@an gelbroking .com Web site: www.an gelbrok ing.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. N othing in this docum ent shou ld be construed a s investment or fina ncial advice. Each recipient of this documen t should m ake

such investigations as they deem necessary to arrive at a n ind ependent evaluation o f an investment in the securities of the comp anies

referred to in this docum ent (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

do cument are those of the ana lyst, and the compa ny may o r m ay not subscribe to all the views expressed w ithin.

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 reliablesources 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 thisdo cument is for general guida nce only. Angel Broking Limited o r any of its affiliates/ group comp anies shall not be in an y wayresponsible 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 ha s not independently verified all the informa tion contained w ithin this document. According ly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to upda te on a rea sonab le basis the informa tion discussed in this ma terial, there may be regulatory,comp liance, or other reasons that prevent us from do ing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed o r pa ssed o n, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other ad visory services in a m erger or specific transaction to the com pan ies referred to in this report, a s on the da te of this report or in

the pa st.

N either Angel Broking Limited, no r its directors, emp loyees or a ffiliates shall be liab le for any loss or d am age that m ay arise from o r in

connection with the use of this information.

N ote: Please refer to the imp ortant ` Stock H olding D isclosure' report on the Ange l website (Resea rch Section). Also, plea se refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment p ositions in the stocks recomm ende d in this report.

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

mm 1qfy2013 ru

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