M&M hikes utility vehicle prices by over 2% with immediate effect - Angel Broking

According to media reports, Mahindra and Mahindra (MM) has increased the prices of its utility vehicles (ex. Quanto) by over 2% with immediate effect to pass on the excise duty hike announced in the Union Budget. The Finance Minister in the Union Budget 2013-14 has increased the excise duty on large SUVs (length greater than 4,000mm and engine displacement exceeding 1,500cc) to 30% from 27% earlier.

As a result, the entire utility vehicle portfolio of MM (ex. Quanto) would be impacted as they are qualified as large SUVs and would attract higher duty. The immediate increase in prices by the company is on the expected lines and has been undertaken to protect margins. We do not see a material impact of the recent price hike on the company-s volumes and expect them to grow at a healthy rate of 12% in FY2014. After the recent correction in the stock price, the stock is trading attractively at 13.5x FY2014E earnings.

We therefore recommend a Buy rating on the stock with a SOTP based target price of Rs. 1,019.

Source : Equity Bulls

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