Result Update: Mahindra & Mahindra Ltd - ACCUMULATE - TP Rs.984 - Kotak

M&M reported strong operational performance in 1QFY19 led by strong volume growth in auto and tractor segment and expansion in EBITDA margin. Revenue and EBITDA came on expected lines and net profit was marginally better than estimate.

Key Highlights

- M&M+MVML (Mahindra Vehicle Manufacturers Limited - 100% subsidiary of M&M) reported revenue of Rs133.6bn, 23% increase over 1QFY18. During the quarter, M&M reported 20% and 19% YoY volume growth in auto and tractor segment respectively. EBITDA margin expanded YoY from 13.2% to 15.8%. We highlight that in 1QFY18, M&M provided for Rs1.44bn on account of expected inventory loss (with dealers and company) on GST transition. However, even post adjusting the above mentioned one-off, EBITDA margin witnessed meaningful improvement YoY and that despite commodity cost pressure. M&M reported PAT of Rs12.3bn, 64% higher YoY.

Valuation and Outlook

- In the auto segment, we expect M&M's performance on the volume front to witness improvement post new launches. M&M will be launching new products in the passenger vehicle segment in coming months. For the tractor industry, management has raised FY19 domestic industry growth guidance to 12-14% (earlier 8-10%). As compared with 1QFY19, we expect the tractor industry volume growth to moderate in the coming quarters as base becomes higher. Despite commodity inflation, M&M reported healthy EBITDA margin in 1QFY19. We expect M&M's margins to broadly remain healthy in FY19/FY20. We have marginally revised our estimates upwards. We retain ACCUMUALTE rating on M&M with revised price target of Rs984 (earlier Rs958).

Shares of MAHINDRA & MAHINDRA LTD. was last trading in BSE at Rs.945 as compared to the previous close of Rs. 933.25. The total number of shares traded during the day was 209481 in over 5272 trades.

The stock hit an intraday high of Rs. 951.4 and intraday low of 928. The net turnover during the day was Rs. 197905642.

Source : Equity Bulls

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