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Research
Mahindra and Mahindra - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-08-13 21:12:32( TIMEZONE : IST )
Mahindra and Mahindra (MM) reported better-than-expected results for 1QFY2013, led by the strong growth momentum in the automotive 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 likely to remain under pressure due to demand slowdown, we expect utility vehicles (UV) to drive the overall volumes led by existing product portfolio 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% earlier) and marginally revised upwards our automotive volumes due to strong momentum in the segment. We maintain our Buy rating on MM.
Strong operating performance for 1QFY2013: MM's top-line grew by an impressive 39.2% yoy (flat qoq) to Rs.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). MM's 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 sequentially) was marginally ahead of our estimates due to a 14.2% decline in other expenditure led by cost control initiatives. On a y-o-y basis, the margin contracted 147bp due to rawmaterial 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 performance, the net profit posted a 20% yoy growth to Rs.726cr, which was 12.9% ahead of our estimates.
Outlook and valuation: At Rs.739, MM is trading at 13.5x FY2014E earnings. We maintain our Buy rating on the stock. Our SOTP target price works out to Rs.879, wherein the company's core business fetches Rs.631/share and value of its investments works out to Rs.248/share.
