1QFY2020 Result Update | Automobile
August 9, 2019
Mahindra & Mahindra Ltd.
BUY
CMP
`550
Performance Update
Target Price
`724
Y/E March (` cr)
1QFY20 1QFY19
% yoy
4QFY19
% qoq
Investment Period
12 months
Net sales
12,923
13,520
(4.4)
14,035
(7.9)
EBITDA
1,623
1,872
(13.3)
1,541
5.3
Stock Info
EBITDA margin (%)
12.6
13.8
(129bp)
11.0
158bp
Sector
Automobile
Market Cap (` cr)
67,070
Reported PAT
2,314
1,221
89.5
849
172.6
Net Debt (` cr)
5,700
Adjusted PAT
1,158
1,206
(4.0)
922
25.6
Beta
0.8
Source: Company, Angel Research
52 Week High / Low
992/515
For 1QFY2020, M&M registered revenue decline of ~4% yoy to `12,923cr.
Avg. Daily Volume
4,67,547
Operating margin declined by 129bps. On the bottom-line front, M&M reported
Face Value (`)
5
PAT growth of ~90% yoy to `2,314cr on the back of one time exceptional gain
BSE Sensex
37,327
~`1,367cr .
Nifty
11,034
Reuters Code
MAHM.BO
Top-line de-grew ~4%: M&M’s top-line de-grew by ~4% yoy to `12,923cr mainly
Bloomberg Code
MM.IN
due to lower volumes (down ~6% yoy) and realization improvement (up ~1.7%
yoy). Farm equipment segment de-grew by ~12% yoy during the quarter, whereas
Shareholding Pattern (%)
automotive segment reported a de-growth of ~1% yoy. The management expects
Promoters
19.9
the worst of the tractor industry decline to be over and estimates 6-8% growth for
MF / Banks / Indian
10.2
the rest of the year. The outlook for the full year is flat yoy. For automotive segment,
FII / NRIs / OCBs
34.5
Indian Public/Others
35.5
management has not given any guidance owing to future uncertainty of industry.
One time exceptional gain boosted the overall profitability: On the operating front,
Abs.(%)
3m
1yr
3yr
the company’s margins contracted by 129bps yoy to 12.6% due to lower volume
Sensex
(4.1)
(2.6)
30.3
growth and new launch expenses. However, M&M reported ~90% yoy rise in net
M&M
(18.5)
(44.0)
(30.7)
profit to `2,314cr on the back of one time exceptional gain of ~`1,367cr (adjusted
PAT grew by ~4% to `1,158cr)
Outlook and Valuation: Over the last few quarters, the company’s volume growth
has remained subdued mainly due to overall slowdown in economy, which has
affected the buying sentiment. However, we believe that any revival in auto industry
Historical share price chart
would benefit M&M on the back of its recent new launches and facelift of some
models, diversified portfolio, strong brand & distribution network. Considering the
1200
above factors, we maintain our Buy recommendation on M&M.
1000
800
Key Financials
600
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
400
Net sales
48,686
53,614
54,213
57,752
200
% chg
10.5
10.1
1.1
6.5
0
Adj. Net profit
4,046
4,819
4,167
4,627
% chg
25.7
19.1
(13.5)
11.1
EBITDA margin (%)
12.8
12.3
11.7
12.0
Source: Company, Angel Research
EPS (`)
34.0
40.5
35.0
38.9
P/E (x)
16.2
13.6
15.7
14.1
Amarjeet S Maurya
P/BV (x)
2.2
1.9
1.7
1.6
022-40003600 Ext: 6831
RoE (%)
13.4
14.1
11.1
11.3
RoCE (%)
14.3
12.9
10.4
10.6
EV/Sales (x)
0.9
0.8
0.9
0.8
EV/EBITDA (x)
7.2
6.4
7.3
6.4
Source: Company, Angel Research Note
Please refer to important disclosures at the end of this report
1
Mahindra & Mahindra| 1QFY2020 Result Update
Exhibit 1: 1QFY2020 Performance
Y/E March (` cr)
1QFY20
1QFY19
% yoy
4QFY19
% qoq
FY2019
FY2018
% chg
Net Sales
12,923
13,520
(4.4)
14,035
(7.9)
53,614
48,686
10.1
Consumption of RM
9159
9557
(4.2)
10037
(8.7)
38256
34135
12.1
(% of Sales)
70.9
70.7
71.5
71.4
70.1
Staff Costs
784
752
4.3
709
10.5
2980.2
2840.9
4.9
(% of Sales)
6.1
5.6
5.1
5.6
5.8
Other Expenses
1,357
1,340
1.2
1,748
(22.4)
5767.5
5486.0
5.1
(% of Sales)
10.5
9.9
12.5
10.8
11.3
Total Expenditure
11,300
11,648
(3.0)
12,494
(9.6)
47,004
42,462
10.7
Operating Profit
1,623
1,872
(13.3)
1,541
5.3
6,610
6,224
6.2
OPM
12.6
13.8
11.0
12.3
12.8
Interest
27
33
(17.1)
28
(3.5)
113.4
112.2
1.1
Depreciation
545
393
38.8
533
2.4
1860.4
1479.4
25.8
Other Income
1,686
286
237
1689.0
1470.0
PBT (excl. Ext Items)
2,736
1,732
58.0
1,217
124.8
6,325
6,102
3.6
Ext (Income)/Expense
PBT (incl. Ext Items)
2,736
1,732
58.0
1,217
124.8
6,325
6,102
3.6
(% of Sales)
21.2
12.8
8.7
11.8
12.5
Provision for Taxation
423
511
368
1,529
1746
(12.4)
(% of PBT)
15.4
29.5
30.3
24
29
Reported PAT
2,314
1,221
89.5
849
172.6
4,796
4,356
10.1
PATM
17.9
9.0
6.0
8.9
8.9
Minority Interest After NP
Extra-ordinary Items
1,156
15
(73)
-22.6
309.5
Reported PAT
1,158
1,206
(4.0)
922
25.6
4,819
4,046
19.1
Source: Company, Angel Research
August 9, 2019
2
Mahindra & Mahindra| 1QFY2020 Result Update
Outlook and Valuation: Over the last few quarters, the company’s volume growth
has remained subdued mainly due to overall slowdown in economy, which has
affected the buying sentiment. However, we believe that any revival in auto industry
would benefit M&M on the back of its recent new launches and facelift of some
models, diversified portfolio, strong brand & distribution network. Considering the
above factors, we maintain our Buy recommendation on M&M with Target Price of
`724.
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 monsoon 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 i.e. 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 9, 2019
3
Mahindra & Mahindra| 1QFY2020 Result Update
Standalone Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Total operating income
48,686
53,614
54,213
57,752
% chg
10.5
10.1
1.1
6.5
Total Expenditure
42,462
47,004
47,870
50,822
Raw Material
34,135
38,256
38,817
41,466
Personnel
2,841
2,980
3,144
3,465
Others Expenses
5,486
5,767
5,909
5,891
EBITDA
6,224
6,610
6,343
6,930
% chg
37.9
6.2
(4.0)
9.3
(% of Net Sales)
12.8
12.3
11.7
12.0
Depreciation& Amortisation
1,479
1,860
2,180
2,305
EBIT
4,745
4,749
4,163
4,626
% chg
58.8
0.1
(12.3)
11.1
(% of Net Sales)
9.7
8.9
7.7
8.0
Interest & other Charges
112
113
103
108
Other Income
1,470
1,689
3,167
2,000
(% of PBT)
24.1
26.7
43.8
30.7
Share in profit of Associates
-
-
-
-
Recurring PBT
6,102
6,325
7,227
6,518
% chg
29.2
3.6
14.3
(9.8)
Tax
1,746
1,529
1,905
1,890
(% of PBT)
28.6
24.2
26.4
29.0
PAT (reported)
4,356
4,796
5,323
4,627
Extraordinary Items
310
(23)
1,156
-
ADJ. PAT
4,046
4,819
4,167
4,627
% chg
25.7
19.1
(13.5)
11.1
(% of Net Sales)
8.3
9.0
7.7
8.0
Basic EPS (Rs)
34.0
40.5
35.0
38.9
Fully Diluted EPS (`)
34.0
40.5
35.0
38.9
% chg
25.7
19.1
(13.5)
11.1
August 9, 2019
4
Mahindra & Mahindra| 1QFY2020 Result Update
Standalone Balance Sheet
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
595
596
596
596
Reserves& Surplus
29,699
33,613
36,864
40,473
Shareholders Funds
30,294
34,209
37,459
41,069
Total Loans
2,958
2,571
2,571
2,571
Deferred Tax Liability
1,767
2,141
2,141
2,141
Total Liabilities
35,019
38,922
42,172
45,781
APPLICATION OF FUNDS
Gross Block
16,878
20,518
17,938
18,938
Less: Acc. Depreciation
9,019
10,437
12,616
14,921
Net Block
7,859
10,082
5,321
4,017
Capital Work-in-Progress
3,129
2,420
2,420
2,420
Investments
20,583
22,016
17,902
17,902
Current Assets
15,846
18,179
20,920
25,586
Inventories
2,702
3,839
3,862
4,114
Sundry Debtors
3,173
3,946
4,010
4,272
Cash
2,894
3,732
3,832
5,649
Loans & Advances
3,769
3,570
3,795
4,620
Other Assets
3,309
3,092
5,421
6,930
Current liabilities
13,887
15,282
9,437
9,189
Net Current Assets
1,958
2,897
11,483
16,397
Deferred Tax Asset
1,489
1,507
1,507
1,507
Mis. Exp. not written off
-
-
-
-
Total Assets
35,019
38,922
42,172
45,781
August 9, 2019
5
Mahindra & Mahindra| 1QFY2020 Result Update
Standalone Cashflow Statement
Y/E March (` cr)
FY2018
FY2019
FY2020E FY2021E
Profit before tax
5669
6355
7227
6518
Depreciation
1479
1860
2180
2305
Change in Working Capital
1780
(506)
(8485)
(3097)
Interest / Dividend (Net)
112
113
0
0
Direct taxes paid
(1289)
(1434)
(1905)
(1890)
Others
(725)
(1465)
0
0
Cash Flow from Operations
7027
4924
(983)
3835
(Inc.)/ Dec. in Fixed Assets
(2669)
(3032)
(1000)
(1000)
(Inc.)/ Dec. in Investments
(2441)
483
0
0
Cash Flow from Investing
(5110)
(2549)
(1000)
(1000)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
0
0
0
0
Dividend Paid (Incl. Tax)
(923)
(1012)
(917)
(1018)
Interest / Dividend (Net)
212
3951
0
0
Cash Flow from Financing
(711)
2939
(917)
(1018)
Inc./(Dec.) in Cash
1207
5314
(2900)
1817
Opening Cash balances
1687
1418
6732
3832
Closing Cash balances
2894
6732
3832
5649
August 9, 2019
6
Mahindra & Mahindra| 1QFY2020 Result Update
Key Ratios
Y/E March
FY2018
FY2019
FY2020E FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
16.2
13.6
15.7
14.1
P/CEPS
11.2
9.8
8.7
9.4
P/BV
2.2
1.9
1.7
1.6
Dividend yield (%)
1.4
1.6
1.4
1.6
EV/Sales
0.9
0.8
0.9
0.8
EV/EBITDA
7.2
6.4
7.3
6.4
EV / Total Assets
1.3
1.1
1.2
1.1
Per Share Data (`)
EPS (Basic)
34.0
40.5
35.0
38.9
EPS (fully diluted)
34.0
40.5
35.0
38.9
Cash EPS
49.0
55.9
63.1
58.3
DPS
7.5
8.9
7.7
8.6
Book Value
254.6
287.5
314.8
345.1
Returns (%)
ROCE
14.3
12.9
10.4
10.6
Angel ROIC (Pre-tax)
48.5
43.0
22.8
23.0
ROE
13.4
14.1
11.1
11.3
Turnover ratios (x)
Asset Turnover (Gross Block)
2.9
2.6
3.0
3.0
Inventory / Sales (days)
20
26
26
26
Receivables (days)
24
27
27
27
Payables (days)
58
60
45
40
Working capital cycle (ex-cash) (days)
(14)
(7)
8
13
August 9, 2019
7
Mahindra & Mahindra| 1QFY2020 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 responsible for any loss
or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited
has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any
representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking
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other reasons that prevent us from doing so.
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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Disclosure of Interest Statement
M&M
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 9, 2019
8
