1QFY2019 Result Update | Automobile
August 8, 2018
Mahindra & Mahindra Ltd.
BUY
CMP
`926
Performance Update
Target Price
`1,050
Y/E March (` cr)
1QFY19
1QFY18
% yoy
4QFY18
% qoq
Investment Period
12 months
Net sales
13,520
12,376
9.2
13,308
1.6
EBITDA
1,872
1,247
50.1
1,754
6.7
Stock Info
EBITDA margin (%)
13.8
10.1
377
13.2
66
Sector
Automobile
Market Cap (` cr)
1,15,014
Adjusted PAT
1,221
749
62.9
1,059
15.3
Net Debt (` cr)
2,900
Source: Company, Angel Research
Beta
0.8
For 1QFY2019, M&M posted good set of results, exceeding our expectations on
52 Week High / Low
945/612
both, top-line as well as bottom-line fronts. Revenues grew by ~9% yoy. On the
Avg. Daily Volume
55,843
bottom-line front, M&M reported growth of ~63% yoy to `1,221cr on the back of
Face Value (`)
5
strong top-line growth and operating margin improvement.
BSE Sensex
37,685
Nifty
11,388
Top-line driven by strong volume growth: The company’s top-line grew by ~9%
Reuters Code
MAHM.BO
yoy to `13,520cr on the back of strong growth in farm equipment segment. Farm
Bloomberg Code
MM.IN
Equipment segment grew by ~41% yoy during the quarter, whereas automotive
segment reported a growth of ~6% yoy. Moreover, positive rural sentiments and
Shareholding Pattern (%)
government push for infra & construction projects are the other key deliverables
Promoters
21.7
which also boosted the company's growth. However, other segment de-grew by
MF / Banks / Indian
9.8
~3%.
FII / NRIs / OCBs
33.9
Indian Public/Others
34.6
Profitability driven by strong revenue growth and lower interest: On the operating
front, the company’s margin strengthened by 377bps to 13.8%. Moreover, M&M
Abs.(%)
3m
1yr
3yr
reported ~63% yoy rise in its net profit to `1,221cr on the back of strong top-line
Sensex
7.1
16.8
33.2
growth.
M&M
9.2
31.6
33.8
Outlook and Valuation: We expect M&M to report net revenue CAGR of ~13% to
~`62,235cr over FY2018-20E mainly due to healthy growth in automobile
segment like Utility Vehicles (on the back of new launches and facelift of some
models) and strong growth in Tractors segment driven by strong brand recall and
improvement in rural sentiment. Further, on the bottom-line front, we expect
Historical share price chart
CAGR of ~18% to `5,600cr over the same period on the back of margin
improvement. Thus, we recommend BUY on the stock with target price of `1,050.
1000
900
Key Financials
800
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
700
Net sales
44,054
48,686
54,939
62,235
600
% chg
7.8
10.5
12.8
13.3
500
Adj. Net profit
3,220
4,046
4,740
5,600
400
% chg
0.4
25.7
17.1
18.2
EBITDA margin (%)
10.2
12.8
12.8
12.8
EPS (`)
27.1
34.0
39.8
47.1
Source: Company, Angel Research
P/E (x)
34.4
27.3
23.3
19.8
P/BV (x)
4.3
3.8
3.4
3.0
Amarjeet S Maurya
RoE (%)
12.5
14.0
14.6
15.2
022-40003600 Ext: 6831
RoCE (%)
10.5
15.0
15.4
15.8
EV/Sales (x)
2.1
1.9
1.7
1.4
EV/EBITDA (x)
20.8
14.9
13.0
11.1
Source: Company, Angel Research Note
Please refer to important disclosures at the end of this report
1
Mahindra & Mahindra| 1QFY2019 Result Update
Exhibit 1: 4QFY2018 Performance
Y/E March (` cr)
1QFY19
1QFY18
% yoy
4QFY18
% qoq
FY2018
FY2017
% chg
Net Sales
13,520
12,376
9.2
13,308
1.6
49445.0
47383.7
4.4
Consumption of RM
9556.6
8,457.39
13.0
9236.4
3.5
34894.1
35411.4
(1.5)
(% of Sales)
70.7
68.3
69.4
70.6
74.7
Staff Costs
752
707
6.4
706
6.4
2840.9
2714.4
4.7
(% of Sales)
5.6
5.7
5.3
5.7
5.7
Other Expenses
1,340
1,965
(31.8)
1,611
(16.8)
5486.0
4743.3
15.7
(% of Sales)
9.9
15.9
12.1
11.1
10.0
Total Expenditure
11,648
11,129
4.7
11,554
0.8
43,221
42,869
0.8
Operating Profit
1,872
1,247
50.1
1,754
6.7
6,224
4,515
37.9
OPM
13.8
10.1
13.2
12.6
9.5
Interest
33
32
3.2
33
(0.8)
112.2
159.6
(29.7)
Depreciation
393
348
13.1
399
(1.6)
1479.4
1526.4
(3.1)
Other Income
265
205
171
1036.4
1345.5
PBT (excl. Ext Items)
1,711
1,072
59.6
1,493
14.6
5,669
4,174
35.8
Ext (Income)/Expense
20.9
47.9
434
548
PBT (incl. Ext Items)
1,732
1,072
61.5
1,541
12.4
6,102
4,723
29.2
(% of Sales)
12.8
8.7
11.6
12.3
10.0
Provision for Taxation
511
323
482
1746.4
1079.2
61.8
(% of PBT)
29.5
30.1
31.3
29
23
Reported PAT
1,221
749
62.9
1,059
15.3
4,356
3,643
19.6
PATM
9.0
6.1
8.0
8.8
7.7
Source: Company, Angel Research
August 8, 2018
2
Mahindra & Mahindra| 1QFY2019 Result Update
Outlook and Valuation
We expect M&M to report net revenue CAGR of ~13% to ~`62,235cr over
FY2018-20E mainly due to healthy growth in automobile segment like Utility
Vehicles (on the back of new launches and facelift of some models) and strong
growth in Tractors segment driven by strong brand recall and improvement in rural
sentiment. Further, on the bottom-line front, we expect CAGR of ~18% to `5,600cr
over the same period on the back of margin improvement. Thus, we recommend
BUY on the stock with target price of `1,050.
Downside risks to our estimates
Strong launches from competitors like Maruti Suzuki, Hyundai Motors and
Ford can grab the market share from M&M
Poor monsoons can impact the overall earnings growth (47% EBIT
contribution from tractors segment)
Lower growth and profitability of subsidiary companies can limit upside
growth
Company Background
Mahindra & Mahindra Ltd (M&M) is an India-based company. The company
operates in nine segments: automotive segment comprises sales of automobiles,
spare parts and related services; farm equipment segment comprises sales of
tractors, spare parts and related services; information technology (IT) services
comprises services rendered for IT and telecom; financial services comprises
services relating to financing, leasing and hire purchase of automobiles and
tractors; steel trading and processing; infrastructure comprising operating of
commercial complexes, project management and development; hospitality
segment comprises sale of timeshare; Systech segment comprises automotive
components and other related products and services, and others segment
comprise s logistics, aftermarket, two wheelers and investment.
August 8, 2018
3
Mahindra & Mahindra| 1QFY2019 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
44,054
48,686
54,939
62,235
% chg
7.8
10.5
12.8
13.3
Total Expenditure
39,539
42,462
47,906
54,269
Raw Material
32,082
34,135
38,732
43,875
Personnel
2,714
2,841
3,516
3,983
Others Expenses
4,742
5,486
5,659
6,410
EBITDA
4,515
6,224
7,032
7,966
% chg
(2.3)
37.9
13.0
13.3
(% of Net Sales)
10.2
12.8
12.8
12.8
Depreciation& Amortisation
1,526
1,479
1,578
1,674
EBIT
2,988
4,745
5,454
6,292
% chg
(15.9)
58.8
15.0
15.4
(% of Net Sales)
6.8
9.7
9.9
10.1
Interest & other Charges
160
112
116
122
Other Income
1,894
1,470
1,300
1,300
(% of PBT)
40.1
24.1
19.6
17.4
Share in profit of Associates
-
-
-
-
Recurring PBT
4,723
6,102
6,638
7,470
% chg
10.2
29.2
8.8
12.5
Tax
1,079
1,746
1,899
1,870
(% of PBT)
22.9
28.6
28.6
25.0
PAT (reported)
3,643
4,356
4,740
5,600
Extraordinary Items
423
310
-
-
ADJ. PAT
3,220
4,046
4,740
5,600
% chg
0.4
25.7
17.1
18.2
(% of Net Sales)
7.3
8.3
8.6
9.0
Basic EPS (Rs)
27.1
34.0
39.8
47.1
Fully Diluted EPS (`)
27.1
34.0
39.8
47.1
% chg
0.4
25.7
17.1
18.2
August 8, 2018
4
Mahindra & Mahindra| 1QFY2019 Result Update
Balance Sheet
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
297
297
297
297
Reserves& Surplus
25,373
28,529
32,226
36,594
Shareholders Funds
25,670
28,826
32,523
36,891
Total Loans
2,816
2,900
2,900
2,900
Deferred Tax Liability
1,637
1,637
1,637
1,637
Total Liabilities
30,122
33,363
37,060
41,428
APPLICATION OF FUNDS
Gross Block
14,938
15,938
16,938
17,938
Less: Acc. Depreciation
7,303
8,782
10,360
12,034
Net Block
7,635
7,155
6,577
5,903
Capital Work-in-Progress
2,038
2,038
2,038
2,038
Investments
17,902
17,902
17,902
17,902
Current Assets
11,764
15,401
20,265
26,472
Inventories
2,716
3,201
3,913
4,604
Sundry Debtors
2,918
3,468
4,365
5,115
Cash
1,687
2,891
4,296
7,107
Loans & Advances
1,528
2,191
3,296
4,356
Other Assets
2,914
3,650
4,395
5,290
Current liabilities
10,158
9,766
10,356
11,520
Net Current Assets
1,605
5,635
9,910
14,952
Deferred Tax Asset
942
942
942
942
Mis. Exp. not written off
-
-
-
-
Total Assets
30,122
33,363
37,060
41,428
August 8, 2018
5
Mahindra & Mahindra| 1QFY2019 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
4639
6102
6638
7470
Depreciation
1327
1479
1578
1674
Change in Working Capital
(31)
(2825)
(2870)
(2231)
Interest / Dividend (Net)
(834)
0
0
0
Direct taxes paid
0
(1746)
(1899)
(1870)
Others
(138)
0
0
0
Cash Flow from Operations
4964
3010
3447
5043
(Inc.)/ Dec. in Fixed Assets
(2060)
(1000)
(1000)
(1000)
(Inc.)/ Dec. in Investments
(1160)
0
0
0
Cash Flow from Investing
(3221)
(1000)
(1000)
(1000)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
0
84
0
0
Dividend Paid (Incl. Tax)
(839)
(890)
(1043)
(1232)
Interest / Dividend (Net)
(59)
0
0
0
Cash Flow from Financing
(898)
(806)
(1043)
(1232)
Inc./(Dec.) in Cash
845
1204
1404
2811
Opening Cash balances
842
1687
2891
4296
Closing Cash balances
1687
2891
4296
7107
August 8, 2018
6
Mahindra & Mahindra| 1QFY2019 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
34.4
27.3
23.3
19.8
P/CEPS
21.4
19.0
17.5
15.2
P/BV
4.3
3.8
3.4
3.0
Dividend yield (%)
0.6
0.8
0.9
1.1
EV/Sales
2.1
1.9
1.7
1.4
EV/EBITDA
20.8
14.9
13.0
11.1
EV / Total Assets
3.1
2.8
2.4
2.1
Per Share Data (`)
EPS (Basic)
27.1
34.0
39.8
47.1
EPS (fully diluted)
27.1
34.0
39.8
47.1
Cash EPS
43.4
49.0
53.1
61.1
DPS
6.0
7.5
8.8
10.4
Book Value
215.7
242.2
273.3
310.0
Returns (%)
ROCE
10.5
15.0
15.4
15.8
Angel ROIC (Pre-tax)
33.6
43.4
41.2
42.6
ROE
12.5
14.0
14.6
15.2
Turnover ratios (x)
Asset Turnover (Gross Block)
2.9
3.1
3.2
3.5
Inventory / Sales (days)
22
24
26
27
Receivables (days)
24
26
29
30
Payables (days)
53
49
45
44
Working capital cycle (ex-cash) (days)
(7)
1
10
13
August 8, 2018
7
Mahindra & Mahindra| 1QFY2019 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
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nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
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Disclosure of Interest Statement
Company Name
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
August 8, 2018
8
