mahindra & mahindra ltd - hemsecurities.com · also mahindra’s scorpio registered highest...

BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING

MAHINDRA & MAHINDRA LTD

Stock Coverage

Date 14th June 2018

BSE Code 500520

NSE Code M&M

Market Cap (Rs Cr) 114554.47

52 week High/Low 932.45/612.50

Industry Automobiles

Face Value Rs 5/Share

Shares O/S (In No) 124.32 Cr

EPS * 60.41

Book Value* 295.81

P/E 15.25

P/B 3.11

*Note: On Consolidated FY’18 financials basis

Shareholding Pattern as on Mar’ 2018

Research Analyst : Astha Jain

The Mahindra Group is a USD 19 billion federation of companies which enjoys a leadership position in utility vehicles, information technology, financial services and vacation ownership in India and is the world’s largest tractor company, by volume. It also enjoys a strong presence in agribusiness, aerospace, commercial vehicles, components, defense, logistics, real estate, renewable energy, speedboats and steel, amongst other businesses. Headquartered in India, Mahindra employs over 2,40,000 people across 100 countries.

Strong Sales Volume: M&M’s iconic SUV, the Bolero has touched a new milestone, having sold 10 lac units, since inception. The Bolero has also regained its position in the list of Top 10 Passenger Vehicles of India where it features as the third highest selling SUV in the country. Bolero has registered year-on-year growth of 23%, outperforming the industry which has witnessed 17% growth. Also Mahindra’s Scorpio registered highest ever annual sales of 53,934 nos. Co’s Pickups registered highest ever annual sales of 149,119 nos along with highest ever annual MTBD volumes at 17,228 nos. Co’s EV sales gaining momentum with annual sales @ 4026 nos.

Robust Financial Performance: Co has posted healthy financial performance in FY18 as bottomline of company has witnessed whopping growth of 100% in FY18 at Rs 7510.39 Cr as compare to Rs 3698 cr in FY17.Co’s operating & net profit margin ratio stood at 14% & 7% & has witnessed surge of 18% & 108 % respectively. Company has witnessed reduction in debt as debt/eq ratio of company has decreased from 1.57 in FY17 to 1.45 in FY18.

Focus Areas: In Automotive Sector, company focuses on strengthening UV portfolio with the launch of U321, S201 & Y400 & strengthening CV portfolio with the launch of ICV Range. Also co is looking for strengthening EV portfolio & aggressive channel & capacity expansion. In Farm Equipment Sector, co focuses on leveraging product & technology along with solution selling & building farm machinery or implementing business & establishing third brand – Gromax . With all this , company is moving towards strong future growth. Valuation

The company is currently trading at 15.25x of FY18 eps of Rs 60.41 while it is trading at 13.49x of FY19E eps & 11.85xof FY20E eps. Co has achieved highest ever auto sector global volumes of 689,358 nos in FY18.Also co has widest range of offerings & company continue to retain dominant position in some of its segment .Company has posted robust set of numbers for FY18 with whopping growth . Hence, looking after strong fundamentals of company & healthy financial performance, we recommend “Buy” on the stock with price target of Rs 1150(appreciation of almost 25%) for long term investment.

www.hemsecurities.com

For Private Circulation Only HEM RESEARCH

BUY CMP 921.45 TARGET 1150 LONG TERM INVESTMENT




Business Segments:

Automotive sector: The company manufactures & markets utility vechicles, light commercial vechicles that includes three wheeler vechicles,namely; Scorpio, Bolero, Champion and many more. The company also exports its products to several countries in Europe, Africa, South America, South Asia and the Middle East. M&M has a tie up with Renault for production & marketing of Logan. Mahindra International is into producing trucks and buses.The company has entered into a joint venture with Navistar for production of disel engines & trucks.

Farm equipment : M&M's farm equipment segment has presence in six continents and has a worldwide network of 800 dealers .Its total combined production capacity is 1,50,000 tractors a year from countries like India, USA, China and Australia. The company is also into agri business.

Trade, Retail & Finance : Mahindra's Intertrade Division provides steel & steel related services. It offers steel raw materials, metals, ferro alloys, etc. It also processes Cold Rolled Grain Oriented (CRGO) and Cold Rolled Non Grain Oriented (CRNGO) steels that are required for transformers & compressors.Mahindra Retails is into distribution business and has tie up with big names like Lego, Disney, Mattel and others. Mahindra Finance is into financing of tractors and other vehicles and is also into Insurance broking.

Infrastructure : M&M has also entered Infrastructure development that operates in real estates, SEZs, hospitality, project engineering and design.Under this it has created Mahindra Holiday & Resorts, Mahindra Lifespaces & Mahindra World City.

Information Technology : Tech Mahindra provides solutions & services to telecommucation majors namely Alcatel, AT&T, BT, Convergys, Ericsson and O2, among others. It is also into business process and technology consulting services through Bristle.

Systech :It is into supply of automotive components.It produces forged and forged / machined components, gears and composities.

Speciality Business : Under this division it has companies like Mahindra Defence,engaged in manufacturing of defence related vehicles.

For Private Circulation Only HEM RESEARCH

\




Whopping growth of 11 % in auto sector with domestic volumes crossing 5 Lac mark On the domestic sales front, driven by positive rural sentiment, Govt’s push for Infra & construction , availability of affordable finance & good monsoon, company’s Automotive Sector recorded total sales of 520286 vehicles (4,65,661 four-wheelers and 54625 threewheelers) as against 4,69,384 vehicles in the previous year resulting in a growth of 10.84%. In the Passenger Vehicle segment, company’s volumes grew by 5.4% at 2,48,859 vehicles [including 2,33,915 Utility Vehicles (UVs), 14,219 Vans and 725 Cars. In the Commercial Vehicle (CV) segment, company sold 2,16,802 vehicles registering a growth of 19.8% over the previous year . In the SCV segment company is a No 1 player since FY14 with market share of approx 47%. Co has achieved highest ever SCV volume of 199,574 in FY18. Co’s volume has been growing at CAGR of 16.2 % from FY07 to FY18 while industry has grown at CAGR of 11.1 % during the same years.

For Private Circulation only HEM RESEARCH




Strong Partnerships & Joint Ventures Mahindra Defence has companies engaged in catering to needs of all three wings of Defence forces —Army, Airforce and Navy. Their product range includes armoured vehicles, underwater warfare equipment, radars and surveillance equipment's etc. Through their Land Systems units in India and UAE they have been supplying customized armoured vehicles to the Indian Army and Para Military Forces and overseas customers. Mahindra Defence Systems (MDS) entered in a partnership with Hindustan Aeronautics Limited (HAL) and Boeing for manufacturing the F/A-i8 Super Hornet in India for its armed forces and pursuing the joint development of future technologies. The Super Hornet Make in India proposal is to build an entirely new and state-of-the-art production facility that can be utilized for other programs like India's Advanced Medium Combat Aircraft (AMCA) program. The plan addresses the infrastructure, personnel training, and operational tools and techniques required to produce a next gen fighter aircraft right here in India. As the most advanced and least expensive aircraft per flight hour of its kind, the F/A-1.8 Super Hornet will deliver on India's need for a carrier and land based multi-role fighter. The Super Hornet does not only have a low acquisition cost, but it costs less per flight hour to operate than any other tactical aircraft in U.S. forces inventory. And with a plan for constant innovation, the F/A-i8 Super Hornet will outpace threats, bolster defence capabilities and make India stronger for decades to come. Recently , company has signed two Memoranda of Understanding (MoUs) with the Government of Maharashtra (GoM), to further its next phase of expansion in electric vehicles (EVs) and achieve its vision of becoming completely electric ready. Under the first MoU , the company will make efforts to become fully electric ready by further investing in its Chakan plant for manufacture of EVs, e-motor, controller, battery pack and other electric vehicle components for multiple mobility applications related to battery pack assembly of EVs. As part of this expansion plan, the company will invest an additional Rs. 500 crore. The second MoU underlines the intent to explore a strategic alliance to enable Mahindra to deploy EVs across key cities in Maharashtra. Towards this, both the company and the Government will work closely with various fleet partners, taxi aggregators, logistics companies, amongst others to deploy 1,000 electric cars over the next 1 year. The first deployment of EVs, as part of the MoU, will see 25 e2oPlus vehicles ported on the Zoomcar platform in Mumbai, on the occasion of World Environment Day. The range of applications for the deployment of these EVs across the key cities of the state will include employee transport between office and home for corporates, taxi hailing, ride sharing and self-drive car rental amongst others. The company will supply EV battery pack, motors and controllers, power electronics, battery pack, drivetrain, other parts/components of EVs, battery assembly and electric vehicles to MVML and M&M plants and other Group companies as well as to other customers. The Government of Maharashtra has conferred the status of ‘Pioneer Mega

Project’ to this proposed expansion.





Consolidated P&L A/c

Rs Cr

Particulars FY16 FY17 FY18 FY19E FY20E

Total Revenue 75841.42 83773.05 93264.77 107254.49 123342.66 Growth ( %) 10.46 111.33 15.00 15.00 Expenditure 65758.98 73041.83 80038.67 91059.06 104717.92 EBIDTA 10082.44 10731.22 13226.10 16195.43 18624.74 Growth (%) 6.43 23.25 22.45 15.00 EBIDTA Margin (%)

13.29 12.81 14.18 15.10 15.10

Other Income 552.80 1177.21 3258.15 3748.02 4310.23 Depreciation 2441.65 2809.11 3279.90 3771.89 4337.67 EBIT 8193.59 9099.32 13204.35 16171.56 18597.30 EBIT Margin (%) 10.80 10.86 14.16 15.08 15.08 Interest 3367.59 3648.46 3987.09 4125.78 4744.64 Exceptional Item 0.00 0.00 0.00 0.00 0.00 PBT 4826.00 5450.86 9217.26 12045.78 13852.66 Tax 2117.53 2299.73 2367.73 4216.03 4848.43 PAT 2708.47 3151.13 6849.53 7829.75 9004.23 Min Int & Ass Sh 439.96 546.91 659.86 659.86 659.86 Consolidated PAT 3148.43 3698.04 7509.39 8489.61 9664.09 Growth (%) -- 17.46 103.06 13.05 13.83 NPM (%) 4.15 4.41 8.05 7.92 7.84

Ratios


EPS* 25.33 29.75 60.41 68.29 77.74

ROCE(%) 12.99 11.91 14.65 15.32 15.18

ROE(%) 11.88 12.44 20.42 19.12 18.18

Book Value 213.10 239.21 295.81 357.23 427.47

Debt/Equity 1.38 1.57 1.45 1.38 1.30

*Note: EPS of all years adjusted on enhanced Equity capital of Rs 621.60 Cr




Consolidated Balance Sheet

Rs Cr


Sh Capital 270.40 270.89 543.13 621.60 621.60

Res & Surplus 26084.75 29250.27 36232.06 43789.68 52521.77

Sh App/Warrants 137.50 216.83 0.00 0.00 0.0

Minority Interest 5920.20 6356.90 8250.47 9545.33 10038.21

Total Debt(Long Term+Short Term Borrowings)

30675.90 40281.41 45134.72 51572.22 59308.05

Other Long Term Liab & Provison

6543.71 6902.83 7639.11 7882.36 8404.27

Net Deferred Tax Liability

652.94 880.78 745.82 862.87 994.89

Sources Of Fund 70285.40 84159.91 98545.31 114274.06 131889

Net Fixed Assets 21337.67 22546.26 28291.70 33678.74 39367.19

Non –Current Investments

8286.49 9872.02 10667.54 12927.53 15427.54

Intangible Assets 1618.39 2391.08 2159.67 2570.89 3005.13

Other Non –Current Assets

24698.07 30223.26 35660.54 40066.16 45303.70

Total Current Assets 43911.20 48886.32 59589.86 68528.34 78807.59

Current Liabilities & Provisions

29566.42 29759.03 37824.00 43497.60 50022.24

Net Current Assets 14344.78 19127.29 21765.86 25030.74 28785.35

Uses Of Funds 70285.40 84159.91 98545.31 11427.06 131889





Standalone Quarterly Financial Highlights

Rs Cr

Particulars Q4FY18 Q4FY17 Q3FY18 YoY% QoQ%

Total Income 13307.88 12047.58 11577.78 10.46 14.94

Total Expenses 11553.68 11177.97 10082.45 3.36 14.59

Operating Profit 1754.20 869.61 1495.33 101.72 17.31

Net Profit 1059.09 621.78 1215.91 70.33 (12.90)

PBIDTM % 13.18 7.22 12.92 82.62 2.01

NPM % 7.96 5.16 10.50 54.20 (24.19)

EPS 8.90 5.24 10.23 69.85 (13.00)

Past Price Movement



[email protected]

HEM SECURITIES LIMITED

MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

MUMBAI OFFICE: 904, A WING. 9TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL ,MUMBAI -400013 PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991

JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757

GROUP COMPANIES

HEM FINLEASE PRIVATE LIMITED

MEMBER-NSE

HEM MULTI COMMODITIES PRIVATE LIMITED

MEMBER-NCDEX, MCX

HEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are

not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an

offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his

own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited,

Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem

Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further

agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all

losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers,

directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the

securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

http://www.hemonline.com/

mailto:[email protected]

mahindra & mahindra ltd - hemsecurities.com · also mahindra’s scorpio registered highest...

Documents