mahindra & mahindra august 08, 2019 - icici...
TRANSCRIPT
ICIC
I S
ecurit
ies –
Retail E
quit
y R
esearch
Result
Update
August 8, 2019
CMP: | 520 Target: | 570 ( 10%) Target Period: 12 months
Mahindra & Mahindra (MAHMAH)
HOLD
Reasonable valuations factor in benign outlook…
M&M reported a stable Q1FY20 performance. Standalone net sales at
| 12,923 crore were down 4.4% YoY tracking 6% YoY & 14.3% YoY decline
in automotive volumes & tractor volumes, respectively. Standalone EBITDA
margins at 12.6% (up 83 bps sequentially) were aided by lower input costs
& other expenses as a percentage of sales. However, a jump in employee
costs contained the benefits. Automotive EBIT margins were down 200 bps
QoQ to 4.8% while tractor EBIT margins rose 300 bps QoQ to 19.3%.
Consequent standalone PAT at | 2,314 crore was aided by exceptional
investment-related gains of | 1,367 crore. Adjusted PAT was at ~| 950 crore.
Leadership in UV, tractor segment to be maintained!
M&M’s 4-W portfolio is concentrated in the faster-growing UV segment. The
company’s new product launches here (XUV300, Marazzo and Alturas G4)
have received an enthusiastic customer response, helping the company
relatively outperform peers during a sharper slowdown in the broader PV
space, with M&M increasing UV market share by ~115 bps YoY to 25% as
of June 2019. In the domestic tractor segment, the company has largely held
on to its dominant position (market share in excess of 40%) amid strong
competitive intensity. Similarly, in other automotive segments (3-W, LCV),
the company has largely managed to withstand competition and maintain
its market share. We anticipate M&M will continue to hold fort in its dominant
competencies even as the industry landscape continues to undergo
disruption in addition to a challenging demand scenario.
Muted volume growth limits room for margin expansion
While we expect the company to not lose meaningful ground to competition,
the prospects for its core automotive and FES businesses remain subdued
in the near to medium term, given a high base (particularly tractors) and
poor demand sentiment. Negative operating leverage is seen pinching
margins as the focus shifts to cost control, with the upcoming BS-VI
changeover complicating matters further. Consequently, we expect M&M to
clock EBITDA margins of 12.6% in FY20E & 11.2% in FY21E.
Valuation & Outlook
We expect sales & EBITDA to grow at 7.1% and 1.8% CAGR, respectively,
for M&M in FY19-21E (with PAT seen declining to ~| 3,950 crore), amid
muted outlook for core tractor and PV businesses accompanied by attendant
pressure on margins. In our SOTP methodology, we value the standalone
business at 6x EV/EBITDA (FY21E basis) and arrive at a target price of | 570
for the company, downgrading it to HOLD. We feel current valuations,
however, offer relative comfort against the rest of the OEM pack given the
company’s strong financials, R&D focus and ongoing efforts on the EV front.
Key Financials FY17 FY18 FY19 FY20E FY21E CAGR (FY19-21E)
Net Sales 44,053.5 48,685.6 53,614.0 55,380.3 61,459.9 7.1%
EBITDA 4,514.7 6,224.1 6,639.6 6,966.0 6,883.9 1.8%
EBITDA Margins (%) 10.2 12.8 12.4 12.6 11.2
Net Profit 3,643.4 4,356.0 4,796.1 5,524.9 3,947.9 -9.3%
EPS (|) 29.3 35.0 38.6 44.4 31.8
P/E 17.7 14.8 13.5 11.7 16.4
RoNW (%) 12.0 13.4 14.1 11.7 9.6
RoCE (%) 14.7 17.3 17.3 14.7 13.2
Key Financial Summary
Source: ICICI Direct Research, Company
Particulars
Particular Amount
Market Capitalization (| crore) 64,646.4
Total Debt (FY19, | crore) 2,480.3
Cash and Investments (FY19, | crore) 6,733.9
EV (FY19, | crore) 60,392.8
52 week H/L (|) 992 / 515
Equity capital (| crore) (FY19) 595.8
Face value (|) | 5
Key Highlights
Standalone sales dip 4.4% in
Q1FY20 tracking 6% auto volume
decline and 14.3% tractor volume
drop
Standalone margins of 12.6% up 83
bps QoQ, aided by lower raw
material costs
Growth outlook remains benign for
both core businesses, with limited
scope for margin improvement
amid negative operating leverage as
well as cost increase due to BS-VI
transition
Downgrade from BUY to HOLD with
revised target price of | 570; valuing
M&M on SOTP basis
Research Analyst
Shashank Kanodia, CFA
Jaimin Desai
ICICI Securities | Retail Research 2
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 1: Variance Analysis
Q1FY20 Q1FY20E Q1FY19 YoY (%) Q4FY19 QoQ (%) Comments
Total Operating Income 12922.7 12929.9 13519.9 -4.4 14035.2 -7.9 Topline came in line with our estimates at | 12,923 crore
Raw Material Expenses 9159.1 9235 9557 -4.2 10037 -8.7
M&M realised savings out of raw material cost with RM as
percentage of sales for quarter coming in at 70.9%, down 60
bps QoQ
Employee Expenses 784.1 776 752 4 709 11
Other expenses 1356.8 1,422 1,340 1.2 1,643 -17.4Other expenses also came in lower by 120 bps QoQ to 10.5% in
Q1FY20
EBITDA 1622.7 1,497.2 1,871.6 -13.3 1,645.8 -1.4
EBITDA Margin (%) 12.6 11.6 13.8 -129 bps 11.7 83 bps EBITDA margins came in healthy at 12.6% primarily tracking
savings realised in raw material costs as well as other
Other income 319.1 251.7 265.0 20.4 236.8 34.8
Depreciation 545.4 506 393 38.8 533 2.4 Depreciation came in higher and will be a new normal, going
Interest 27.1 31 33 -17 28 -3
Tax 422.6 364 511 -17.3 368 14.7
PAT 2313.8 848 1221 89.5 849 172.6
PAT for the quarter came in higher tracking beat on margins as
well as exceptional gains amounting to | 1367 crore on account
of sales of some investments as well gains on shares sold by
M&M benefit trust
EPS 9.3 7.2 9.7 -4.0 7.4 25.6
Key Metrics
Automotive revenues (|
crore)
8100.7 8,069 8,188 -1.1 10,442 -22.4 Segmental revenues were largely on expected lines
FES revenues (| crore) 4382.2 4,525 5,007 -12.5 3,206 36.7
EBITDA margins (%) 12.6 11.6 13.8 -129 bps 11.7 83 bps
Source: Company, ICICI Direct Research
Exhibit 2: Change in estimates
FY20E FY21E
(| Crore) Introduced Introduced Comments
Revenue 55,380 61,460 We expect revenues at M&M to grow at a CAGR of 7.1% over FY19-21E
EBITDA 6,966 6,884
EBITDA Margin (%) 12.6 11.2
EBITDA margins in FY20E are expected to improve 20 bps YoY to 12.6% and then
optically dip to 11.2% in FY21E due to increase in ASPs & costs associated with BS-
VI (same in absolute numbers)
PAT 5,525 3,948
EPS (|) 44.4 31.8 Earnings CAGR expected to be muted at M&M, going forward
Source: Company, ICICI Direct Research
Exhibit 3: Assumptions
Introduced Introduced Comments
Units FY18 FY19 FY20E FY21E
Automotive volumes 548,664 608,597 611,015 630,142On automobile front; with UV as its major forte, we expect M&M to outperform
industry and post 0.4% YoY growth in FY20E followed by 3.1% growth in FY21E
Automotive ASP's (|) 580,009 580,892 617,579 679,472ASP increase primarily tracking increase in regulatory compliance costs due to
increased mandatory safety features as well transition to BS-VI (April 2020)
FES Volumes 318,538 330,436 317,087 332,322On FES front, we expect M&M to maintain its market leadership with 40%+ market
share. However, industry is expected to consolidate over FY19-21E
FES ASPs (|) 505,232 510,679 505,643 510,001 Tractor ASPs expected to be largely stable
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 3
ICICI Direct Research
Result Update | Mahindra & Mahindra
Conference Call Highlights
Management outlook/guidance and demand
M&M believes the worst may be over on the tractor side, with the
industry posting flattish growth for FY20E if the remaining eight months
registering ~8% volume growth. Continued normal rains and a good
Rabi sowing season would be upside risks to the management’s outlook
The company refrained from giving growth outlook on the PV side.
However, it is hopeful of outpacing the industry
The issues currently facing the industry are three-pronged:
(a) Financing – Tighter financing norms resulting in ~20% drop in
customers, fall in car LTV ratio over the past 12-18 months from ~90%
earlier to ~80% levels now and poor transmission of interest rate cuts
by banks
(b) Transaction costs – Higher insurance incidence and cost increase
relating to regulatory changes and registration fees, etc
(c) Sentiment – Adversely impacted by a general economic slowdown
and lower government spend in rural areas along with deficient
monsoons in some parts
It believes solutions lie in better policy rate transmission, improved
financing terms, a relook at current road taxes and GST structure,
possible rollback of insurance cost increases and a well thought out
scrappage policy
The management, however, sees some green shoots in the form of
recent normalisation of monsoons and low inflation. Growth in H2FY20E
could possibly be supported by some pre-buy before BS-VI rollout, the
festive season and a favourably low base from last year
Under BS-VI, the company sees 1.2 L diesel engine migrating fully to
petrol and the mix in 1.2-2.0L diesel engine (i.e. sub-4m UV) to migrate
from current 75:25 (diesel: petrol) to ~50:50. Diesel, however, is seen
retaining prominence in larger capacity engines (>2.0 L)
M&M has ~5,000 EV units on ground. In its view, recent policy initiatives
have made the e-3W and e-4W (fleet) segments viable for customers
from an affordability standpoint
The company’s relative volume performance in Q1FY20 was aided by
new product launches. SsangYong performance was hurt by slowdown
in South Korea market and strong export geographies for the subsidiary
Sales, costs and margins
M&M realised ~0.5% benefits from lower commodity prices in Q1FY20;
these are expected to continue in Q2FY20 also
The company maintained gross margins in FES while automotive EBIT
margins were hurt by model mix skewness towards recent launches
Higher depreciation during the quarter was on account of elevated
amortisation costs on newer products introduced. The same is likely to
persist, going forward, with FY21E depreciation set to increase due to
rollout of BS-VI compliant vehicles
Others
Dealership closures for M&M are limited to a handful (single digit).
Channel inventory is normal, barely ~2,000-3,000 units (~2 days) higher
than usual in both, PV & tractors.
ICICI Securities | Retail Research 4
ICICI Direct Research
Result Update | Mahindra & Mahindra
Annual Report FY19 - Key takeaways
Key developments during the year
Revealed electric hyper-car Pininfarina Battista and revived iconic
motorcycle brand, Jawa
Mahindra Electric Mobility sets up EV technology manufacturing facility
in Bangalore at an outlay of | 100 crore
Electric Vehicle (EV)
The company has invested in manufacturing battery packs, power
electronics and motor assembly and power train. It is also investing
| 500 crore on EV Project under new EV Policy of Maharashtra
government for product development and capacity enhancement of EV
and components
M&M is developing EV versions of KUV10 and XUV300 to complement
existing EV offerings in 3-W, 4-W and LCV range
During FY19, the company along with Mahindra Electric Mobility sold
10,276 EVs (1,811 4-W & 8,465 3-W) vs. 4,026 units YoY in FY18
JV, collaborations and acquisitions
Furthered strategic collaboration with Ford by signing definitive
agreements for a) supplying BS-VI compliant gasoline engines to Ford
in India, b) joint development of connected vehicle solutions to be used
by M&M and Ford, c) developing, manufacturing and supplying of a new
midsize SUV by M&M to Ford
Acquired 10% stake in Canadian startup Resson Aerospace, which is
focused on precision agriculture solutions
Mahindra Agri Solutions entered into 60:40 JV with Sumitomo
Corporation for crop care business
Incorporated step-down subsidiary Automobili Pininfarina GmBH for
design, engineering & manufacture of high technology and luxury EVs
All assets and liabilities of 100% subsidiary MVML transferred to M&M
at book value effective April 1, 2019
Exhibit 4: M&M’s EV manufacturing facility in Bangalore
Source: Company
According to M&M, share of diesel in passenger
cars has declined from 47% in FY13 to 19% in FY19.
However, for utility vehicles, demand for diesel
vehicles continue to be strong with diesel powered
UVs accounting for 83% of volume in FY19
The company’s R&D spend at 5% of sales highlights
its innovation focus
ICICI Securities | Retail Research 5
ICICI Direct Research
Result Update | Mahindra & Mahindra
Financial story in charts
Exhibit 5: Top line trend
40875
44054
48686
53614
55380
61460
5.0
7.8
10.5 10.1
3.3
11.0
-
2
4
6
8
10
12
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
(| crore)
Total Operating Income Growth (%)
Source: Company, ICICI Direct Research
Exhibit 6: Segment wise revenue trend
7,682
7,890
7,115
9,136
8,188
8,639
8,084
10,442
8,101
4,321
3,958
4,098
3,716
5,007
4,028
4,634
3,206
4,382
0
1,500
3,000
4,500
6,000
7,500
9,000
10,500
12,000
Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
(| crore)
Automotive Farm Equipment
Source: Company, ICICI Direct Research
Exhibit 7: Segment wise volume trend
117
138
129
165
140
151
143
175
132
85
81
82
71
101
78
91
61
86
0
20
40
60
80
100
120
140
160
180
200
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
(000's
)
Automotive Farm Equipment
Source: Company, ICICI Direct Research
We expect sales to grow at a CAGR of 7.1% over
FY19-21E
Segment wise revenue mix for quarter i.e. Q1FY20
was at automotive: tractor: others: 63:34: 3
In Q1FY20; automotive segment volumes declined
6% YoY to 132 K units while sales for tractors
declined 14.3% YoY to 86,000 units
ICICI Securities | Retail Research 6
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 8: M&M tractor market share movement
222
203
250
304
317
550
491
598
728
787
40.4
41.3 41.8 41.8
40.3
30.0
32.0
34.0
36.0
38.0
40.0
42.0
44.0
100
200
300
400
500
600
700
800
900
FY15 FY16 FY17 FY18 FY19
(%
)
('0
00 units)
M&M Domestic tractor industry M&M market share (RHS)
Source: CRISIL, ICICI Direct Research
Exhibit 9: M&M UV market share movement
207
222
223
234
235
552
587
762
922
941
37.5 37.9
29.2
25.4 25.0
20.0
22.0
24.0
26.0
28.0
30.0
32.0
34.0
36.0
38.0
40.0
100
200
300
400
500
600
700
800
900
1,000
FY15 FY16 FY17 FY18 FY19
(%
)
('0
00 units)
M&M Domestic UV segment M&M market share (RHS)
Source: SIAM, ICICI Direct Research
Exhibit 10: EBITDA and EBITDA margin trend
4620
4515
6224
6640
6966
6884
11.3
10.2
12.8
12.4 12.6
11.2
8
10
12
14
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
(| crore)
EBITDA EBITDA Margins (%)
Source: Company, ICICI Direct Research
M&M outperformed industry in Q1FY20 with market
share regaining to ~43% as of quarter end
M&M is a leading UV player domestically. With
impressive launches in the recent past; we expect the
company to gain notable market share over FY19-21E
We build in 12.6% & 11.2% as EBITDA margins in
FY20E and FY21E, respectively
ICICI Securities | Retail Research 7
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 11: Profitability trend
3153
3220
4046
4819
4494
3948 3.2
2.1
25.7
19.1
(6.7)
(12.1)
(15)
(10)
(5)
-
5
10
15
20
25
30
-
1,000
2,000
3,000
4,000
5,000
6,000
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
(| crore)
PAT Growth (%)
Source: Company, ICICI Direct Research
Exhibit 12: Return ratios trend
17.5
14.7
17.3 17.3
14.7
13.2
14.3
12.0
13.4
14.1
11.7
9.6
8
11
14
17
20
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
RoCE RoE
Source: Company, ICICI Direct Research
PAT CAGR is in negative territory for M&M over
FY19-21E primarily tracking high base in FY19
RoCE profile at M&M is seen deteriorating to ~13%
by FY21E
ICICI Securities | Retail Research 8
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 13: Valuation matrix (SOTP Valuation)
Automotive Business (UV+PV+CV+Tractors) | crore |/share
Standalone business
FY21E EBITDA 6,884
Assigning EV/EBITDA Multiple of 6x 6.0
Enterprise Value 41,303 332
Net Debt (5,616) -45
Value of Standalone Business (A) 46,919 377
Mahindra Vehicle Manufacturers Ltd
Investment made by M&M (wholly owned subsidiary) 4,065
Assigning 0.5x P/B on investment value 0.5
Value of MVML attributable to M&M (B) 2,033 16
Total value of automobile business (C= A+B) 394
Value of Investments (listed companies)
M&M
stake
Estimated
value
Contribution
to M&M
(%) | crore | crore |/share
Tech Mahindra 26 63,893 16,650 134 IDirect Target market cap*
M&M Financial Services 51 22,241 11,387 92 IDirect Target market cap*
Mahindra Life space 52 1,949 1,005 8 IDirect Target market cap*
Mahindra CIE 11 8,717 997.2 8 IDirect Target market cap*
Mahindra Holidays & Resorts 67 2,840 1911.3 15 Current market cap*
SsangYong Motors 75 2,610 1,958 16 Current market cap*
Other subsidiaries & investments 9,850 79
Total Value of subsidiaries & associates (D) 43,758.3 352
Value of investments post 50% holding company discount (E = 0.5*D) 176
M&M Target Price (value of equity per share , C+E) 570
Valuation Matrix (SOTP)
Remark
Source: ICICI Direct Research
Exhibit 14: Valuation Summary
Sales Growth DEPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY18 48,685.6 10.5 35.0 19.6 16.0 9.7 13.4 17.3
FY19 53,614.0 10.1 38.6 10.1 13.4 9.1 14.1 17.3
FY20E 55,380.3 3.3 44.4 15.2 14.4 8.5 11.7 14.7
FY21E 61,459.9 11.0 31.8 (28.5) 16.4 8.6 9.6 13.2
Source: Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 9
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 15: Recommendation history vs. consensus
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
400
600
800
1,000
1,200
1,400
1,600
1,800
Aug-19May-19Mar-19Dec-18Oct-18Jul-18May-18Mar-18Dec-17Oct-17Jul-17May-17Mar-17Dec-16Oct-16
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Aug-16
Source: Reuters, ICICI Direct Research
Exhibit 16: Top 10 shareholders
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 Prudential Management & Services Pvt. Ltd. 30-Jun-19 11.9 141.5 0.00
2 Life Insurance Corporation of India 30-Jun-19 11.2 133.4 10.13
3 M&M Benefit Trust 30-Jun-19 7.1 84.5 -19.20
4 M&M Farm Equipment Employees Welfare Fund 3-Jun-19 7.1 84.5 84.47
5 Mahindra & Mahindra Employees Stock Option Trust 23-Jul-19 4.3 51.2 -0.09
6 Stewart Investors 31-May-19 3.9 46.3 -0.25
7 SBI Funds Management Pvt. Ltd. 30-Jun-19 2.5 29.2 0.22
8 Caisse de Depot et Placement du Quebec 30-Jun-19 2.0 23.4 22.57
9 BlackRock Institutional Trust Company, N.A. 31-Jul-19 1.9 22.1 -0.11
10 The Vanguard Group, Inc. 30-Jun-19 1.8 21.1 -0.18
Source: Reuters, ICICI Direct Research, ICICI Direct Research
Exhibit 17: Recent activity
Investor name Value Shares Investor name Value Shares
M&M Farm Equipment Employees Welfare Fund +802.98M +84.47M M&M Benefit Trust -182.52M -19.20M
Caisse de Depot et Placement du Quebec +214.59M +22.57M ICICI Prudential Life Insurance Company Ltd. -125.08M -13.16M
Life Insurance Corporation of India +96.34M +10.13M CPP Investment Board -12.24M -1.26M
GIC Private Limited +10.75M +1.13M APG Asset Management N.V. -8.73M -0.90M
MFS Investment Management +8.89M +0.94M First State Investments (HK) Ltd. -6.67M -0.72M
Buys Sells
Source: Reuters, ICICI Direct Research
Exhibit 18: Shareholding pattern
(in %) Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
Promoter 21.7 21.6 21.6 21.5 19.9
FII 34.0 34.0 33.0 31.3 34.5
DII 21.3 21.2 21.9 23.4 24.1
Others 23.1 23.2 23.6 23.8 21.6
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 10
ICICI Direct Research
Result Update | Mahindra & Mahindra
Financial Summary
Exhibit 19: Profit and loss statement | crore
(Year-end March) FY18 FY19 FY20E FY21E
Total operating Income 48,685.6 53,614.0 55,380.3 61,459.9
Growth (%) 10.5 10.1 3.3 11.0
Raw Material Expenses 34,134.7 38,256.5 39,429.7 45,211.9
Employee Expenses 2,840.9 2,980.2 3,169.9 3,389.7
Other Expenses 5,486.0 5,737.7 5,814.8 5,974.4
Total Operating Expenditure 42,461.5 46,974.4 48,414.3 54,576.0
EBITDA 6,224.1 6,639.6 6,966.0 6,883.9
Growth (%) 37.9 6.7 4.9 -1.2
Depreciation 1,479.4 1,860.4 2,215.2 2,458.4
Interest 112.2 113.4 114.5 97.5
Other Income 1,036.4 1,689.0 1,320.4 1,311.8
PBT 5,668.8 6,354.8 5,956.7 5,639.9
Others (incl exceptional item) -433.6 29.7 -1,367.1 0.0
Total Tax 1,746.4 1,529.0 1,798.8 1,692.0
PAT 4,356.0 4,796.1 5,524.9 3,947.9
Growth (%) 19.6 10.1 15.2 -28.5
EPS (|) 35.0 38.6 44.4 31.8
Source: Company, ICICI Direct Research
Exhibit 20: Cash flow statement | crore
(Year-end March) FY18 FY19 FY20E FY21E
Profit after Tax 4,356.0 4,796.1 5,524.9 3,947.9
Add: Depreciation 1,479.4 1,860.4 2,215.2 2,458.4
(Inc)/dec in Current Assets -2,219.3 -1,803.9 -658.1 -1,255.7
Inc/(dec) in CL and Provisions 3,559.6 1,230.8 306.6 1,475.3
CF from operating activities 7,175.7 6,083.4 7,388.7 6,625.8
(Inc)/dec in Investments -2,784.7 -1,341.3 -2,800.0 -1,800.0
(Inc)/dec in Fixed Assets -2,658.7 -3,373.7 -3,000.0 -3,000.0
Others 227.4 734.7 -9.3 -32.1
CF from investing activities (5,216.0) (3,980.4) (5,809.3) (4,832.1)
Issue/(Buy back) of Equity -2.5 -195.9 0.0 0.0
Inc/(dec) in loan funds 91.5 -384.1 -300.0 -300.0
Dividend paid & dividend tax -1,118.9 -1,268.1 -1,268.1 -1,342.7
Others 276.4 582.9 -0.2 -0.2
CF from financing activities (753.5) (1,265.2) (1,568.3) (1,642.9)
Net Cash flow 1,206.2 837.8 11.1 150.9
Opening Cash 1,687.5 2,893.7 3,731.5 3,742.7
Closing Cash 2,893.7 3,731.5 3,742.7 3,893.6
Source: Company, ICICI Direct Research
Exhibit 21: Balance Sheet | crore
(Year-end March) FY18 FY19 FY20E FY21E
Liabilities
Equity Capital 595.0 595.8 595.8 595.8
Reserve and Surplus 29,699.1 33,613.4 37,870.3 40,475.5
Total Shareholders funds 30,294.0 34,209.2 38,466.1 41,071.3
Total Debt 2,864.4 2,480.3 2,180.3 1,880.3
Deferred Tax Liability 277.2 634.1 634.1 634.1
Others 1,326.4 1,487.9 1,536.9 1,705.6
Total Liabilities 34,762.0 38,811.5 42,817.4 45,291.4
Assets
Gross Block 17,892.0 21,974.6 25,394.4 28,394.4
Less: Acc Depreciation 10,032.5 11,892.9 14,108.1 16,566.5
Net Block 7,859.5 10,081.7 11,286.3 11,827.9
Capital WIP 3,128.7 2,419.8 2,000.0 2,000.0
Total Fixed Assets 10,988.3 12,501.5 13,286.3 13,827.9
Other investments 16,645.5 19,032.1 21,032.1 23,032.1
Liquid Investments 4,047.6 3,002.4 3,802.4 3,602.4
Inventory 2,701.7 3,839.3 4,096.6 4,546.4
Debtors 3,173.0 3,946.3 4,248.4 4,714.7
Loans and Advances 975.2 673.4 695.6 771.9
Other current assets 581.4 539.2 2,061.8 2,321.8
Cash 2,893.7 3,731.5 3,742.7 3,893.6
Total Current Assets 9,549.0 9,001.3 12,426.9 15,068.6
Creditors 6,881.1 8,603.4 9,678.2 9,862.3
Provisions 565.5 667.4 688.7 701.8
Total Current Liabilities 7,446.6 9,270.8 10,366.9 10,564.1
Net Current Assets 2,102.5 (269.5) 2,060.0 4,504.6
Application of Funds 34,762.0 38,811.5 42,817.4 45,291.4
Source: Company, ICICI Direct Research
Exhibit 22: Key ratios
(Year-end March) FY18 FY19 FY20E FY21E
Per share data (|)
EPS 35.0 38.6 44.4 31.8
Cash EPS 46.9 53.5 62.3 51.5
BV 243.7 275.2 309.4 330.4
DPS 7.5 8.5 8.5 9.0
Cash Per Share 23.3 30.0 30.1 31.3
Operating Ratios (%)
EBITDA Margin 12.8 12.4 12.6 11.2
PBT / Net sales 9.7 8.9 8.6 7.2
PAT Margin 11.3 11.3 9.0 8.3
Inventory days 20.3 26.1 27.0 27.0
Debtor days 23.8 26.9 28.0 28.0
Creditor days 64.5 65.9 65.0 65.0
Return Ratios (%)
RoE 13.4 14.1 11.7 9.6
RoCE 17.3 17.3 14.7 13.2
RoIC 94.5 60.2 49.9 44.9
Valuation Ratios (x)
P/E 14.8 13.5 11.7 16.4
EV / EBITDA 9.7 9.1 8.5 8.6
EV / Net Sales 1.2 1.1 1.1 1.0
Market Cap / Sales 1.3 1.2 1.2 1.1
Price to Book Value 2.1 1.9 1.7 1.6
Solvency Ratios
Debt/Equity 0.1 0.1 0.1 0.0
Current Ratio 0.8 0.8 0.9 0.9
Quick Ratio 0.5 0.5 0.6 0.6
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 11
ICICI Direct Research
Result Update | Mahindra & Mahindra
Exhibit 23: ICICI Direct Research coverage universe (Auto & Auto Ancillary)
Sector / Company CMP M Cap
(|) TP(|) Rating (| Cr) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E
Amara Raja (AMARAJ) 645 590 Reduce 11017 28.3 31.1 33.8 22.3 20.3 18.6 11.0 9.7 8.7 21.2 21.0 20.5 14.5 14.3 14.0
Apollo Tyre (APOTYR) 153 145 Hold 8741 11.9 14.8 16.2 12.6 10.1 9.3 6.8 6.8 6.4 8.0 7.7 8.2 8.3 8.0 8.2
Ashok Leyland (ASHLEY) 61 70 Hold 17951 6.8 5.3 5.5 9.1 11.5 11.1 6.1 6.6 6.2 26.9 23.1 22.7 24.3 17.4 16.7
Bajaj Auto (BAAUTO) 2632 2360 Reduce 76175 161.6 160.5 168.7 15.4 15.5 14.8 11.0 10.3 9.4 21.0 19.2 25.3 19.9 19.1 18.1
Balkrishna Ind. (BALIND) 729 740 Hold 14087 40.5 40.9 45.3 19.2 19.0 17.2 11.8 10.6 9.1 20.4 19.0 19.3 16.7 19.0 19.3
Bharat Forge (BHAFOR) 410 535 Buy 32590 22.2 23.8 25.4 21.0 19.5 18.3 11.9 11.0 10.3 18.4 18.5 19.1 19.1 17.9 17.5
Bosch (MICO) 14225 15550 Reduce 43416 523.6 538.6 573.1 32.5 31.6 29.7 23.3 22.0 20.5 17.5 15.9 15.0 25.8 23.5 22.3
Eicher Motors (EICMOT) 16577 15875 Hold 45189 808.1 821.9 903.2 20.2 19.9 18.1 14.3 13.6 11.7 32.5 27.7 26.1 24.8 20.8 19.4
Escorts (ESCORT) 468 430 Reduce 4157 54.6 47.3 53.4 8.5 9.8 8.6 5.1 4.9 4.2 21.6 18.0 18.0 15.6 12.3 12.3
Exide Industries (EXIIND) 176 205 Hold 14981 9.1 11.2 12.4 18.1 16.1 14.6 10.6 8.5 7.6 18.4 20.9 20.9 12.9 14.2 14.2
Hero Moto (HERHON) 2540 2200 Hold 50724 169.5 187.4 175.5 13.6 12.3 13.1 8.4 8.2 7.4 37.1 32.0 31.5 26.3 22.5 22.1
JK Tyre & Ind (JKIND) 56 60 Hold 1263 7.8 3.4 9.1 7.3 16.8 6.3 6.3 6.8 5.6 10.2 7.9 10.1 10.3 3.5 8.9
Mahindra & Mahindra (MAHMAH) 520 570 Hold 64646 38.6 44.4 31.8 13.5 11.7 16.4 9.1 8.5 8.6 17.3 14.7 13.2 14.1 11.7 9.6
Mahindra CIE (MAHAUT) 176 230 Buy 6647 13.2 14.1 17.1 14.8 13.8 11.4 7.8 7.8 6.4 12.4 11.1 11.9 13.2 12.6 14.2
Maruti Suzuki (MARUTI) 5773 5000 Reduce 174391 248.3 221.2 250.0 22.8 25.5 22.6 12.3 13.6 11.6 16.3 12.0 13.0 16.3 13.4 13.9
Motherson (MOTSUM) 94 125 Hold 29716 5.1 5.0 6.5 23.5 23.9 18.4 8.5 8.5 6.6 13.5 12.3 16.0 14.7 13.2 15.5
Tata Motors (TELCO) 120 160 Hold 50934 -84.6 9.3 21.4 -1.8 16.1 7.0 3.9 3.6 3.1 5.4 9.1 11.3 7.1 9.8 15.4
Wabco India (WABTVS) 6070 6510 Hold 11513 148.8 157.7 178.3 41.7 39.3 34.8 26.6 24.5 21.5 15.9 14.5 14.3 23.0 21.4 21.0
RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Source: Reuters, ICICI Direct Research
ICICI Securities | Retail Research 12
ICICI Direct Research
Result Update | Mahindra & Mahindra
RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities | Retail Research 13
ICICI Direct Research
Result Update | Mahindra & Mahindra
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