M&M - 4QFY2013 Result Review - Angel Broking

Mahindra and Mahindra (MM) reported better than expected set of results with a stellar show in both the Automotive and Tractor segment. The top-line registered a modest growth of 9.8% yoy to Rs. 11,342cr. The standalone revenues grew by 11.7% yoy (2.7% qoq) to Rs. 10,486cr, aided by on better than expected realizations. EBITDA margin surprised positively and came in at 12.1%, up ~180bp yoy (+90bp qoq) vs our estimate of 11% on lower input costs; raw material costs to sales declined by 110bp qoq at 74.8% led by benign commodity costs and possibly a better mix. Reported EBITDA came in at Rs. 1,270cr, up 31% yoy (4.8% qoq). Adjusted net profit came at Rs. 798cr, up 4.2% yoy, driven by strong operating performance.

The company reported strong operating performance across both the Automotive (AS) and Farm Equipment Segment (FES). AS reported strong realizations growth of 13% yoy (2.5 qoq) and EBIT margin at 9.8%, up 220bp yoy (+130bp qoq). FES realizations grew by 8.4% qoq (9.4% qoq) and EBIT margin came in at 16%, up 30bp yoy (+50bp qoq). Adjusted net profits including MVML stood at Rs. 873cr, up 8% yoy, led by healthy EBITDA margin at 14.4%, up 230bp yoy (+90bp qoq)

Management expects the auto demand environment to be more challenging in FY2014 due to higher taxes and fuel price volatility but the company is witnessing initial positive signs of tractor demand growth in the backdrop of good monsoon expectations and rabi crop realizations. Management expects 6-8% tractor demand growth in FY2014. M&M is working on three new platforms on the passenger car side, along with a slew of product variants. Along with product platforms, management highlighted that it is working with Ssangyong Motor on six new engine options, including gasoline and diesel variants. We are still in the process of revising our numbers and therefore the rating is under review.

Source : Equity Bulls

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