MOSL: Mahindra & Mahindra | Annual Report (Buy)-Getting future ready-UV segment needs push-tractor segment healthy

​Mahindra & Mahindra | Annual Report: Getting future ready; UV segment needs push; tractor segment healthy

(MM IN, Mkt Cap USD12.7b, CMP INR1383, TP INR1625, 17% Upside, Buy)

Mahindra & Mahindra’s (MM) FY17 annual report highlights the company’s focus on technologically advanced new products in the farm segment, continuous improvement in the UV segment to comply with the new emission/regulatory norms, and market share increase in the CV segment.

Farm segment: Focus on technological prowess

Right products drive growth and market share

• Strong tractor segment growth of ~23% in FY17 was supported by the good performance of YUVO, which has helped the company gain market share in the 30-50 HP segment (covers 70-80% of industry). YUVO, an all-new tractor platform launched in April 2016, was highly successful in strengthening the technology leadership of Mahindra tractors in FY17.
• MM, in April 2017, also launched its third new tractor platform, JIVO, a new-age small tractor platform in the sub-25 HP category (covers only 5% of industry), which is an ideal choice for the growing segments of horticulture and row crop farming.

Strategy: Farming 3.0 (a holistic view by MM)

• Farming 3.0 is a comprehensive ecosystem, with offerings across the value chain for the farmer. It provides access to smart machinery, precision farming practices, digital platforms and ecosystem connect with an aim to help farmers improve their crop yields and double their farm income.
• With increasing labor cost and its scarcity, greater adoption of various forms of mechanization is the way forward, in our view. Against this backdrop, MM believes that the market for tractors and other farm equipment should grow over the long term.