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SYNOPSIS

Mahindra & Mahindra is the only

Indian company among the top three

tractor manufacturers in the world.

Mahindra & Mahindra Ltd has

completed all formalities related to

the acquisition of a majority stake in

SsangYong Motor Company.

During the quarter ended, the

robust growth of revenue is

increased by 36.11% Rs.61210.90

million.

Mahindra & Mahindra Ltd has got

assigned by "ICRA reaffirms the

LAA+ (stable outlook) and A1+

ratings for bank facilities.

The company’s revenue and PAT are

expected to grow at a CAGR of 28%

and 60% over 2009 to 2012E

respectively.

Mahindra has acquired of EPC was

part of its diversification strategy in

the agricultural business.

Years Net sales EBITDA Net Profit EPS P/E

FY 10 186021.1 32453.4 20877.5 36.89 17.67

FY 11E 234487.4 42395.4 29393.1 50.06 13.02

FY 12E 273177.9 49341.3 34300.2 58.42 11.16

Stock Data:

Sector: Automobile

Face Value Rs. 5.00

52 wk. High/Low (Rs.) 826.40/491.00

Volume (2 wk. Avg.) 138000

BSE Code 500520

Market Cap (Rs.In mn) 382802.2

Share Holding Pattern

1 Year Comparative Graph

M&M Ltd BSE SENSEX

C.M.P: Rs. 652.00 Target Price: Rs. 743.00 Date: March 23rd 2011 BUY

Mahindra & Mahindra Ltd Result Update: Q3 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Mahindra & Mahindra 652.00 382802.2 44.27 14.73 4.97 190.00

Ashok Leyland 52.85 70108.8 4.18 12.64 3.03 150.00

Tata Motors 1141.00 720479.2 28.99 39.36 4.81 150.00

Swaraj Mazda 436.50 5421.3 33.86 12.89 4.42 80.00

Company Profile

Mahindra & Mahindra Limited (M&M) is a major automaker in India. It is the flagship company of the USD 6.7 billion Mahindra Group. M&M was set up in 1945 to make general purpose utility vehicles for the Indian market and soon it started manufacturing agricultural tractors and light commercial vehicles (LCVs). Later the company has expanded its operations to secure a significant presence in many more important sectors.

In the year 2005, M&M had become the largest producer of SUVs in India. The company has started a separate sector, the Mahindra Systems and Automotive Technologies (MSAT), to focus on developing components and offering engineering services. The group is well diversified having its presence in the auto sector, auto components, farm equipment, infrastructure development, telecom and software and trade and financial services. It is a leading name in the general-purpose utility vehicles market in India. The company has recently made an entry in the two-wheeler segment which will see the company emerge as a full-range player with a presence in almost every segment of the automobile industry. Mahindra's Farm Equipment Sector is also the proud recipient of the Japan Quality Medal, the only tractor company worldwide to be bestowed this honour. It also holds the distinction of being the only tractor company worldwide to win the Deming Prize. Subsidiaries Indian Subsidiaries

• First Choice Wheels Limited • Mahindra Life Space Developers Limited • Mahindra Consulting Engineers Limited • Mahindra Ashtech Limited

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• Tech Mahindra Limited • Bristlecone India Limited • Mahindra Engineering and Chemical Products Limited • Mahindra Gujarat Tractor Limited • Mahindra Holdings & Finance Limited • Mahindra Holidays and Resorts India Limited • Mahindra Infrastructure Developers Limited • Mahindra Intertrade Limited • Mahindra Logisoft Business Solutions Limited • Mahindra & Mahindra Financial Services Limited • Mahindra Steel Service Centre Limited • Mahindra Shubhlabh Services Limited • NBS International Limited • Mahindra Insurance Brokers Limited • Mahindra Engineering Design & Development Company Limited • Mahindra World City Developers Limited • Mahindra SAR Transmission Private Limited • Mahindra International Limited • Mahindra World City (Maharashtra) Limited • Mahindra Renault Private Limited • Mahindra Ugine Steel Company Limited • Mahindra World City (Jaipur) Limited • Tech Mahindra (R & D Services) Limited • Plexion Technologies (India) Private Limited • CanvasM Technologies Limited • iPolicy Networks Limited • Mahindra Hinoday Industries Limited • Mahindra Stokes Holding Company Limited • Mahindra Integrated Township Limited • Ashtamudi Resorts Private Limited • Mahindra Automotive Limited • Mahindra Castings Private Limited • Mahindra Forgings Limited • Mahindra Hotels and Residences India Limited • Mahindra Retail Private Limited • Mahindra Technology Park Limited • Mahindra Holdings Limited • Mahindra Logistics Limited • Mahindra Rural Housing Finance Limited • Punjab Tractors Limited • Mahindra Residential Developers Limited • Mahindra Aerospace Private Limited • Mahindra First Choice Services Limited • Mahindra Navistar Engines Private Limited

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Foreign Subsidiaries

• Bristlecone Limited • Mahindra (China) Tractor Company Limited • Tech Mahindra GmbH • Bristlecone GmbH • Plexion Technologies GmbH • Mahindra Forgings Europe AG • Gesenkschmiede Schneider GmbH • JECO-Jellinghaus GmbH • Falkenroth Umformtechnik GmbH • Falkenroth Grundstucksgesellschaft GmbH • Schöneweiss & Co. GmbH • Fried. Hunninghaus GmbH • Fried. Hunninghaus GmbH & Co. KG • MHR Hotel Management GmbH • PT Tech Mahindra Indonesia • Mahindra Europe s.r.l. • Mahindra Overseas Investment Company (Mauritius) Limited • Mahindra-BT Investment Company (Mauritius) Limited • Mahindra Forgings Overseas Limited • Mahindra Forgings International Limited • Mahindra Forgings Mauritius Limited • Mahindra Forgings Global Limited • Mahindra Middle east Electrical Steel Service Centre • Tech Mahindra (Singapore) Pte. Limited • Bristlecone (Singapore) Pte. Limited • Tech Mahindra (R & D Services) Pte. Limited • Mahindra & Mahindra South Africa (Proprietary) Limited • Tech Mahindra (Thailand) Limited • Bristlecone UK Limited • Stokes Group Limited • Stokes Forgings Dudley Limited • Jensand Limited • Stokes Forgings Limited • Plexion Technologies (UK) Limited • Tech Mahindra (Americas) Incorporated • Mahindra USA Incorporated • Bristlecone Incorporated • Mahindra Holidays and Resorts USA Incorporated • Tech Mahindra (R & D Services) Incorporated • Plexion Technologies Incorporated • CanvasM (Americas) Incorporated • Tech Mahindra (Beijing) IT Services Limited • Mahindra Graphic Research Design • Bristlecone (Malaysia) SDN.BHD • Tech Mahindra (Malaysia) SDN.BHD.

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• Heritage Bird (M) SDN.BHD

Joint Ventures

• Mahindra Sona Limited • PSL Erickson Limited • Mahindra Water Utilities Limited • Mahindra Inframan Water Utilities Private Limited

Associates

• Owens Corning (India) Limited • Mahindra Construction Company Limited • Officemartindia.com Limited • Rathna Bhoomi Enterprises Private Limited • Kota Farm Services Limited • Mriyalguda Farm Solution Limited • Mega One Stop Farm Services Limited • Mahindra Forgings Limited • Mahindra Composites Limited • Mahindra Lifespace Developers Limited • Mahindra Renault Nissan Automotive Private Limited • Swaraj Automotives Limited • Swaraj Engines Limited

Company Products

THREE WHEELERS

• Mahindra champion

• Mahindra Alfa PIK UPS

• Mahindra maxx maxi truck

• Mahindra pik-up

• Maxx pik-up

• Bolero pik-up

• Bolero camper SUV’s

• Scorpio

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UV’s

• Bolero

• Maxx range

• XYLO Mahindra farm equipments

• Mahindra powerol

• Gen sets TRACTORS

• MG 312 deluxe

• MG 405 racer

• MG 405E racer

• MG 453 racer Used cars - Purchase, Sale and Finance.

Investment Highlights

� Q3 FY11 Results Update

Mahindra & Mahindra reported a surge of 77.59% in the net profit from ordinary

activities after tax for the quarter ended Dec. 31, 2010. The company has posted a

net profit of Rs 7,346.80 million for the quarter ended Dec. 31, 2010 as compared

to Rs 4,137.00 million for the quarter ended Dec. 31, 2009. Net sales during the

quarter is surged by 36.11% to Rs.61210.90 million from Rs.44974.20 million as

compared to same quarter previous year. Total income has increased by 36.30% to

Rs 61629.60 million for the quarter ended Dec. 31, 2010. The EPS for the quarter

is stood at Rs.12.51for the Dec quarter ended.

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Quarterly Results - Standalone (Rs in mn)

As At Dec-10 Dec-09 %change

Net sales 61210.90 44974.20 36.11

PAT 7346.80 4137.00 77.59

Basic EPS 12.51 15.12 (17.26)

� Break up of Expenditure

� Acquired majority stake

Mahindra & Mahindra Ltd has completed all formalities related to the acquisition

of a majority stake in SsangYong Motor Company (SYMC) and that the company is

no longer in Court Receivership. Mahindra had emerged as the preferred bidder for

SsangYong in August 2010.

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� Approved to buy 38% stake in EPC Industries.

Mahindra & Mahindra (M&M) has approved to buy 38% stake in EPC Industries. It

has acquired of EPC was part of its diversification strategy in the

agricultural business. This is a related diversification for Mahindra in the

agriculture space where it has a major presence in machinery and services through

the farm equipment sector.

� ICRA Rating

Mahindra & Mahindra Ltd has got assigned by "ICRA reaffirms the LAA+ (stable

outlook) and A1+ ratings for bank facilities of Mahindra & Mahindra Limited;

reaffirms the LAA+ (stable outlook) rating for its NCD programme.

� Group acquired stake in The East India Company

Mahindra Group has acquired a minority stake in The East India Company, the

global luxury brand. Both companies will thus commence a long standing

relationship with significant investment perpetuate the growth of the world’s oldest

international brand.

� New manufacturing unit

Company has announced that going to open new tractor plant in Zaheerabad,

Andhra Pradesh which is eco-friendly facility with an investment of over Rs.300 cr.

which will be spread over across 100 acres. The installed capacity of the plant will

be 100000 tractors which can be scaled up to meet additional demand and

production will commence by 2012.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09 FY10 FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 130936.80 186021.10 234487.49 273177.93

Other Income 2703.40 1993.50 3023.15 3174.31

Total Income 133640.20 188014.60 237510.64 276352.24

Expenditure -119907.80 -155561.20 -195115.17 -227010.86

Operating Profit 13732.40 32453.40 42395.47 49341.38

Interest -452.60 -278.10 368.99 332.09

Gross profit 13279.80 32175.30 42764.46 49673.47

Deprecation -2915.10 -3707.80 -4020.45 -4422.50

Profit Before Tax 10364.70 28467.50 38744.01 45250.97

Tax -1996.90 -7590.00 -9350.89 -10950.73

Profit After Tax 8367.80 20877.50 29393.12 34300.24

Equity capital 2726.20 2829.50 2935.60 2935.60

Reserves 49773.70 75321.50 104714.62 139014.85

Face value 10.00 5.00 5.00 5.00

EPS 30.69 36.89 50.06 58.42

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Jun-10 30-Sep-10 31-Dec-10 31-Mar-11E

Description 3m 3m 3m 3m

Net sales 51601.00 54343.60 61210.90 67331.99

Other income 204.80 1997.70 418.70 401.95

Total Income 51805.80 56341.30 61629.60 67733.94

Expenditure -43845.20 -45393.90 -50798.50 -55077.57

Operating profit 7960.60 10947.40 10831.10 12656.37

Interest 227.00 90.50 27.10 24.39

Gross profit 8187.60 11037.90 10858.20 12680.76

Deprecation -976.20 -970.00 -1021.80 -1052.45

Profit Before Tax 7211.40 10067.90 9836.40 11628.31

Tax -1587.50 -2483.00 -2489.60 -2790.79

Profit After Tax 5623.90 7584.90 7346.80 8837.52

Equity capital 2830.50 2852.20 2935.60 2935.60

Face value 5.00 5.00 5.00 5.00

EPS 9.93 13.30 12.51 15.05

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Key Ratios

Particulars FY09 FY10 FY11E FY12E

No. of Shares(In Million) 272.62 565.9 587.12 587.12

EBITDA Margin (%) 10.49% 17.45% 18.08% 18.06%

PBT Margin (%) 7.92% 15.30% 16.52% 16.56%

PAT Margin (%) 6.39% 11.22% 12.54% 12.56%

P/E Ratio (x) 21.24 17.67 13.02 11.16

ROE (%) 15.94% 26.71% 27.30% 24.16%

ROCE (%) 17.90% 33.81% 33.66% 30.95%

Debt Equity Ratio 0.77 0.37 0.28 0.22

EV/EBITDA (x) 12.94 11.37 9.03 7.76

Book Value (Rs.) 192.58 138.1 183.35 241.77

P/BV 3.39 4.72 3.56 2.7

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Charts:

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Outlook and Conclusion

At the current market price of Rs.652.00, the stock is trading at 13.02 x FY11E

and 11.16 x FY12E respectively.

Earning per share (EPS) of the company for the earnings for FY11E and FY12E

is seen at Rs.50.06 and Rs.58.42 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 28% and

60% over 2009 to 2012E respectively.

On the basis of EV/EBITDA, the stock trades at 9.03 x for FY11E and 7.76 x for

FY12E.

Price to Book Value of the stock is expected to be at 3.56 x and 2.70 x

respectively for FY11E and FY12E.

Mahindra & Mahindra Ltd has got assigned by "ICRA reaffirms the LAA+ (stable

outlook) and A1+ ratings for bank facilities.

We recommend ‘BUY’ in this particular scrip with a target price of Rs.743.00 for

Medium to Long term investment.

Industry Overview

Post liberalisation in 1991, Indian automobile sector has been aptly described as the

sunrise sector. Owing to its vertical and horizontal integration with other key

segments of the economy, the industry is said to be a major growth driver. A steady

growth in the sector has attracted heavy investments from various foreign majors

through direct investments or private equity.

India continues to consolidate its position on the global front being one of the world’s

top 10 auto-producing countries. India, the seventh largest vehicle producing nation

in the world, now accounts for 5 per cent of global auto production, up from 1.4 per

cent at the beginning of 2000, according to industry lobby Society of Indian

Automobile Manufacturers (SIAM).

According to a study by global consultancy firm Ernst & Young, the Indian market will

clock the fastest compound annual growth rate between 2009 and 2020, more than

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double that of China and the triad of North America, Europe and Japan. India's CAGR

between 2009 and 2020 is expected to be 14 per cent compared with China's 6 per

cent, other emerging markets' 6 per cent (which includes BRIC nations) and the triad’s

4 per cent.

Investments:

India has emerged as one of the favourite investment destinations for automotive

manufacturers in recent times.

• Maruti Suzuki India Ltd (MSIL) has announced an investment of US$ 411.45

million for setting up its third plant at Manesar in order to capitalise on the

rapid growth of the Indian auto industry. This new production line–Maruti's

sixth overall would have 250,000 units annual capacity.

• The auto-maker has also launched its luxury sedan Kizashi in India. The cars

would be imposrted from parent company’s Japan facility.

• Volvo-Eicher Commercial Vehicles (VECV) has announced an investment of US$

61.51 million for a new engine plant at its existing facility at Pithampur,

Madhya Pradesh. With this, India will now become a global manufacturing hub

for Volvo's new medium-duty engine platform, with the only other factory for

the engine type being present in Japan.

• Tata Motors is in talks with a Canada-based company for its second generation

gearless Nano.

• Toyoto plans to invest US$ 107 million to make engines and gearboxes for

Toyota's new small car, Etios that is expected to be launched by year-end.

• India Yamaha Motor Limited is also planning to tap the rural market, which

currently accounts for around 15 per cent of its overall sale. The company has

launched a new bike YBR 110 that will target the rural markets.

• Mercedes Benz has met its single largest order—of 150 cars worth US$ 14.7

million—from the small industrial town of Aurangabad, Maharashtra.

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• The Renault-Nissan alliance and Bajaj Auto have signed a memorandum of

understanding for developing a low-cost car. According to the MoU, the design,

engineering, manufacturing and supply base expertise to create the product will

be executed by Bajaj with the support of the Renault-Nissan alliance.

• Indo-Russian commercial vehicle joint venture (JV) Kamaz Vectra Motors plans

to more than double its annual capacity to 12,000 units at its Hosur plant by

2012 to capture the fast-growing market in India.

• Ashok Leyland and Japanese car maker Nissan Motor Co Ltd have announced

the launch of three light commercial vehicles (LCVs) from 2011 through 2013.

The auto makers also confirmed to be in talks to create a small car for the

Indian market within the US$ 2,000 - US$ 6,000 price range.

• British luxury brand Jaguar Land Rover (JLR) plans to increase presence in

India and will tap parent Tata Motors for assistance in areas like logistics and

service support.

• BMW, the luxury car maker, is planning to infuse US$ 15.76 million in its

Indian operations. Andreas Schaaf, President, BMW India, said that the

company had invested US$ 24.77 million till September 2010 and this would be

increased to US$ 40.53 million by the end of 2012.

• Luxury carmaker Mercedes-Benz India will set up a new facility for building of

city bus bodies at its Chakan plant in Pune. The new unit will become

operational by mid-2011 and will have a capacity of 700 units a year.

• Mercedes Benz has also re-introduced its super premium sedan Maybach in

India in 2011.

• Mahindra & Mahindra has revealed its plans to launch 8-10 new products,

including a premium sports utility vehicle, across various segments by March

2012.

Domestic Market/ Sales:

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• India’s auto market grew at 32.69 per cent in 2010, marginally better than

China’s 32.44 per cent, according to SIAM.

• According to the data released by SIAM, in December 2010, total sale of vehicles

across categories registered a growth of 30.51 per cent to 13,05,872 units, as

against 10,00,562 units in the same month of 2009. The industry has been

growing at around 30 per cent in the ongoing fiscal.

• According to data released by SIAM, the passenger vehicles segment during

April-December 2010 grew at 31.83 per cent over same period last year.

Passenger cars grew by 32 per cent, utility vehicles grew by 20.82 per cent and

multi-purpose vehicles grew by 50.58 per cent during this period.

• The overall commercial vehicles segment registered a growth of 34.08 per cent

during April-December 2010, as compared to the same period last year. While

medium and heavy commercial vehicles registered growth of 42.85 per cent,

light commercial vehicles grew at 27.12 per cent.

• Two wheelers registered a growth of 28.21 per cent during April-September

2010. Mopeds, scooters and motorcycles grew by 24.47 per cent, 48.90 per cent

and 24.62 per cent, respectively.

Road Ahead:

Global auto companies are investing to tap the growing demand in India as investment

spending and the government's social programmes raise incomes in smaller cities and

rural areas too. "The Indian automobile industry is geared up to invest up to US$

17.12 billion in fresh capacity in the next four years," Vishnu Mathur, Director-

General, SIAM said. He further stated, "The components industry will also invest US$

12 billion up to the end of the Automotive Mission Plan."

Car and motorcycle sales in India are setting records with rising incomes, cheap

lending by banks and launch of new models such as Volkswagen's Polo and Fiat's

Linea. Car manufacturing capacity is set to rise to 5.7 million units by 2015,

according to consultants Ernst & Young.

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Further, India aims to become the small car hub of the world by dethroning Japan,

the biggest maker of compact cars, a majority of which is consumed domestically. Last

year, it had pipped Brazil to become the second-largest producer of such cars.

Passenger vehicle production is expected to grow to 9 million a year in 2020, while

two-wheeler production will touch 30 million, said B.S. Meena, secretary, department

of heavy industries.

According to the annual forecast of the SIAM, passenger vehicle sales in the country

will be 21,96,791 units in 2010-11 as compared to 19,49,248 units in 2009-10.

While two-wheeler sales are expected to be up 9-10 per cent at 10,287,837 units from

9,368,230 units in 2009-10, commercial vehicle sales in India will grow 17-18 per cent

at 6,21,681 units vis-à-vis 5,31,395 units last financial year. Sales of three-wheelers

are expected to go up 7-8 per cent at 4,73,693 units in the current financial year as

against 4,40,368 units in 2009-10.

However, with demand outgrowing the supply in the market, the overall market

growth for 2010-11 is most likely to exceed SIAM's initial prediction of 10-14 per cent.

________________ ____ _________________________ Disclaimer:

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sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

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affiliates 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. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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