Sector Update| 1 September 2020
Automobiles
Mahindra & Mahindra
CMP: INR608
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
MM IN
1,209
755.7 / 10.3
649 / 246
-3/32/11
TP: INR723 (+19%)
Buy
Above est.; Volumes grow 7.8% YoY to 54.9k
Tractors surprise positively; UV volumes in line with estimates
Financials Snapshot (INR b)
Y/E MARCH
2020 2021E 2022E
Sales
455
425
496
EBITDA
58.0 55.4
66.8
Adj. PAT*
35.8 33.7
42.1
Adj. EPS (INR)
30.0 28.2
35.3
EPS Gr. (%)
-30.3
-5.8
25.0
BV/Sh. (INR)
290
313
339
Ratios
RoE (%)
9.7
9.0
10.4
RoCE (%)
5.9
8.3
9.6
Payout (%)
24
21
26
Valuations
P/E (x)
20.3 21.5
17.2
P/BV (x)
2.1
1.9
1.8
Div. Yield (%)
0.4
0.8
1.2
FCF Yield*
0.2
4.0
6.4
*incl.MVML
M&M’s tractor volumes surged 65% YoY to 24.5k units (v/s est. 21.5k units). We
have factored in 6.5% volume growth for FY21E, implying 14% residual growth
or 29.4k units.
UVs (incl. pick-ups) stood flat YoY at 29.9k units (in-line). Domestic passenger
UVs grew ~3% YoY while domestic pick-ups grew 9% YoY. We estimate UV
volumes to decline 15% in FY21E, implying 14.9% residual growth or run-rate of
36.8k units.
3W volumes plunged 94% YoY to 307 units.
Commenting on the performance, Mr. Veejay Ram Nakra, Chief of Sales &
Marketing, Automotive Division of M&M Ltd. said,
“At Mahindra, we continue
to see good recovery in demand both for SUVs and Pick-ups in the Small
Commercial Vehicles segment. For the month of August, we have registered
growth in both SUVs and Pick-ups. We have been able to meet the uplift in
demand by managing the supply chain challenges and going forward will
continue to keep our focus on it.”
Commenting on the performance, Hemant Sikka, President – FES Sector, M&M
Ltd. said,
“The Tractor industry growth continues to remain strong in August.
This is primarily on account of continued positive sentiment, due to increase in
Kharif sowing area, thereby indicating a bumper harvest, bountiful monsoon,
good rural cash flows and base effect. We expect rural sentiments to remain
positive and translate into robust tractor demand as we move into the festive
period. In the exports market, we have sold 955 tractors, a growth of 1% over
last year.”
The stock trades at core P/E of 12.8x FY22E S/A EPS and 1.3x core P/B. Maintain
Buy.
Snapshot of volumes for Aug-20
YoY
Company Sales
Mahindra &
Mahindra
UV (incl. pick-ups)
LCV & M&HCV
Three-Wheelers
Tractors
Aug-20 Aug-19
YoY (%)
chg
7.8
0.1
-75.6
-94.3
65.1
MoM
Jul-20
MoM (%)
chg
7.4
17.5
61.6
269.9
-3.7
Residual Residual FY21 YTD
Growth Monthly Monthly
FY21
FY21
FY20 YTD (%) chg
Gr. (%)
(%) Run rate Run rate
YTD
estimate
201,272 329,075 -38.8
84,852 178,683 -52.5
461
6,050 -92.4
442 23,183 -98.1
115,517 121,159 -4.7
705,068
342,193
6,511
34,825
321,539
-9.4
-15.0
-42.3
-44.0
6.5
12.2 71,971
14.9 36,763
15.8
864
-11.8 4,912
14.0 29,432
40,254
16,970
92
88
23,103
54,884 50,902
29,917 29,883
202
829
307 5,373
24,458 14,817
51,080
25,470
125
83
25,402
Jinesh Gandhi - Research analyst
(Jinesh@MotilalOswal.com)
Research analyst: Vipul Agarawal
(Vipul.agarawal@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.