Views on Mahindra & Mahindra 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Mahindra & Mahindra 3QFY2014 results:

"Mahindra & Mahindra (MM) reported broadly in-line performance for 3QFY2014 driven by strong growth in the farm equipment segment (revenues and EBIT up by 20.4% and 36.8% yoy respectively) even though the automotive segment continued posting poor performance (revenues and EBIT down by 12.3% and 2.3% yoy respectively).

The top-line declined by 2% yoy to Rs. 10,556cr, in-line with our estimates of Rs. 10,415cr, primarily due to a 2.1% yoy decline in volumes. The volume growth continues to be impacted due to the decline in the automotive segment (down 11.9% yoy) amid higher competition in the utility vehicle segment. Nevertheless, tractor sales continued its strong momentum registering a growth of 21% yoy driven by strong monsoons. EBITDA margins expanded strongly by 185bp yoy (30 qoq) to 13.1%, in-line with our expectations of 13.2%, driven by price increases and superior product-mix (lower share of traded goods following decline in automotive volumes and higher share of tractors in the product-mix - 37.7% as against 30.6% yoy). As a result, operating front grew strongly by 14.1% yoy to Rs. 1,382cr. Consequently, adjusted bottom-line grew by 11.7% yoy to Rs. 934. The bottom-line growth benefitted slightly from the 27.5% yoy growth in the other income. The tax rate for the quarter was too marginally higher at 23.4% as against 20.6% in 2QFY2014. We retain our positive view on MM and maintain our Buy rating on the stock with an SOTP target price of Rs. 1,050."

Source : Equity Bulls

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