Mahindra & Mahindra - Raise our target price to Rs. 1110 - Dolat Capital

Auto segment driven by strong UV Sales. M&M's market share rose from 48.8% in April'12 to 49.8% in April'13 led by the success of its new launches.

- The company continues to maintain its leadership in the tractor segment and is now the No1 tractor player in the world.

- The management mentioned that although they are not looking at any new brand launch in FY14 in the auto segment, the refreshes will continue to happen. Also, three new brands will be launched in FY15.

- On the tractor side, the new Zaheerabad plant is ready and started commercial production in 1QFY14. A new brand will be launched in tractor segment in FY14.

- We remain positive on M&M as it continues to post robust growth. The newly launched Quanto is also gaining momentum. Macro headwinds may affect the demand in the tractor segment. We estimate tractor sales to grow at a CAGR of ~7% during FY13-15. The management mentioned that although tractor industry is expected to grow ~7-8% in FY14, they are witnessing positive signs and the growth may be much better than industry expectation.

We expect its revenue to grow at a CAGR of ~12% during FY13-15 and EBIDTA to grow at ~14%. The stock is currently trading at a P/E of 14.1x FY15 standalone earnings. The subsidiaries add almost Rs180/- to the stock on a SOTP basis (book up given next page. We raise our target price from Rs. 1050/- to Rs. 1110/-. We recommend Accumulate.

Source : Equity Bulls

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