ICICI Direct's research report on Mahindra and Mahindra
Mahindra & Mahindra (M&M) reported a relatively healthy operational performance in Q1FY21. Standalone net sales fell 56.6% YoY. Automotive ASPs surprised positively, coming in at Rs 6.9 lakh/unit while ASP for farm equipment segment (FES) i.e. tractor was at Rs 5.1 lakh/unit. Standalone EBITDA in Q1FY21 was at Rs 549 crore with corresponding EBITDA margins at 9.8% (down 261 bps QoQ), primarily tracking a rise in staff costs (percentage of sales basis). Automotive segment posted EBIT loss of Rs 576 crore while EBIT margins in FES expanded strongly by 280 bps QoQ to 20.4%. Consequent standalone PAT for the quarter came in at Rs 112 crore, crimped by lower other income and higher interest costs.
Outlook
We expect sales, EBITDA to grow at 5%, 11.6% CAGR, respectively, in FY20-22E. We continue to like M&M for its strong rural presence and sharpened capital allocation focus, although pace of recovery on automotive side remains a monitorable. We maintain BUY rating on M&M, valuing it at Rs 700/share on SOTP basis (7.5x FY22E EV/EBITDA for base business; 30% holdco discount to its investments).
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