MOSL: MAHINDRA & MAHINDRA (Buy)-Softening RM prices/lower discounts combine driving superior op. performance
Mahindra & Mahindra: Softening RM prices/lower discounts combine driving superior op. performance
(MM IN, Mkt Cap USD12b, CMP INR672, TP INR810, 20% Upside, Buy)
- Volumes declined 0.4% YoY in 4QFY19 due to lower tractors volumes (-14.5% YoY), partly offset by higher UV volumes (+5.7% YoY). Realizations increased 5% YoY (+6% QoQ) to ~INR586.2k (our estimate: INR556.6k). Net sales (incl. MVML) were up 5% YoY to INR138b (our estimate: INR131b). EBITDA declined 6% YoY to INR18.7b (our estimate: INR15b), with the margin contracting 160bp YoY (+30bp QoQ) to 13.5% (our estimate: 11.5%). Auto PBIT margin shrank 170bp YoY (+300bp QoQ) to 8.8%. Tractor EBIT margin contracted 330bp YoY (-300bp QoQ) to 16.2%. Adj. PAT declined 6% YoY to INR10.5b (our estimate: INR7.5b). For FY19, revenue/EBITDA/ adj. PAT were up 11%/7%/25% YoY.
- Takeaways from earnings call: (a) Domestic tractors/PV/CV industry is guided to grow at ~5%/3-5%/10-12% in FY20. (b) FES inventory comfortable at 4-5 weeks (v/s industry inventory at 7-8 weeks). (c) Around 30% of XUV3OO sales come from the petrol variant. (d) RM price are showing signs of moderation with stability expected in 1HFY20. (e) JAWA booking trends remain healthy; one more product launch expected before BS6. (f) The company guided to improve the PBIT margin of its key global subsidiaries to 5% in 3-5 years.
Mahindra & Mahindra is a holding company. Through its subsidiaries, Co. is engaged in manufacturing, distributing and selling of tractors and multi utility vehicles, light commercial vehicles and three wheelers. In addition, Co. is also engaged in provision of information technology and telecommunications services and other services related to financing, leasing, hire purchase of automobiles and tractors. Co. has four significant segments: Automotive, Farm Equipment, IT Services and Financial services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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