Mahindra & Mahindra - Tractor volume surprises with 38% YoY growth - Motilal Oswal

- M&M's Apr-13 Tractor volumes grew by 38% YoY (+33.9% MoM) to 23,202 units (v/s 17,250 units). The company mentioned such high growth is due to improved market sentiments (led by festivals in this month). Our channel interaction indicates inventory build-up as well, apart from healthy retails, post the inventory correction undertaken in 4QFY13. For FY14, we forecast a growth of 7% for M&M's tractor volumes.

- Auto volumes grew marginally by 2% YoY (-20% MoM) to 41,432 units (v/s est ~45,338 units). UVs & Pick-ups segment grew by 6.6% YoY (-19.7% MoM) to 35,742 units, against our expectation of 38,225 units. Growth in passenger UVs stood only at 1% YoY, while SCVs (pick-ups) grew by 10% YoY to 14,414 units. Our industry interaction indicates pressure across product segments except Bolero. Sales for XUV5OO is estimated at 2,500 units (v/s FY13 avg of 3,800 units), while Xylo/Quanto at 1,500 units. 3-wheeler volumes declined by 13.4% YoY (-16.5% MoM) to 4,036 (v/s est 5,032) units.

- Pravin Shah, Chief Executive, Automotive Division, Mahindra & Mahindra Ltd. said on release of monthly Auto division sales, "We are extremely disappointed that the additional 3% excise duty on SUVs has not been reversed in the Finance Bill. We remain cautiously optimistic of the current situation and do hope that with the much awaited and needed reduction in interest rates announcement by the RBI next week, the auto industry will look up. At Mahindra, we hope to create excitement with the launch of the Verito Vibe and other product variants".

- The stock trades at 12.2x/9.8x consol. FY14E/FY15E EPS of INR 78.6/97.7 respectively. Maintain Buy.

Source : Equity Bulls

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