Buy Mahindra & Mahindra - Tax Booster - PINC Result Review

TAX BOOSTER

Mahindra & Mahindra's (M&M) Q1FY11 results were ahead of estimates with a better margin and lower tax rates. Despite raw material cost pressure, M&M was able to contain margin erosion at 150bps to 15%. The company reported a net profit of Rs5.6bn as against our estimate of Rs4.9bn.

Outlook: The company plans to have multiple launches on Xylo and Maximmo platform during FY11. We expect overall volumes of M&M to be higher by 16.4% and 10.1% in FY11 and FY12 respectively. We maintain our earnings estimate for FY11 and FY12 at Rs 39.5 and Rs43.7 respectively.

VALUATIONS AND RECOMMENDATION

The stock is currently trading at 16.3x and 14.7x FY11E and FY12E standalone earnings respectively. We reiterate our 'BUY' rating on the stock with a revised target price of Rs808 (earlier Rs782) based on the Sum of the Parts (SOTP) valuation.

Source : Equity Bulls

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