2QFY2019 Result Update | Automobile
November 15, 2018
Mahindra & Mahindra Ltd.
BUY
CMP
`770
Performance Update
Target Price
`1,050
Y/E March (` cr)
2QFY19
2QFY18
% yoy
1QFY19
% qoq
Investment Period
12 months
Net sales
12,989
12,184
6.6
13,520
(3.9)
EBITDA
1,605
1,703
(5.7)
1,872
(14.2)
Stock Info
EBITDA margin (%)
12.4
14.0
(162)
13.8
(149)
Sector
Automobile
Market Cap (` cr)
95,415
Adjusted PAT
1,649
1,305
26.4
1,221
35.1
Net Debt (` cr)
2,900
Source: Company, Angel Research
Beta
0.8
For 2QFY2019, M&M posted subdued performance on both, top-line as well as
52 Week High / Low
992/683
bottom-line fronts. Revenues grew by ~7% yoy to `12,989cr. On the bottom-line
Avg. Daily Volume
1,75,348
front, M&M reported growth of ~26% yoy to `1,649cr on the back of one time
Face Value (`)
5
exceptional income and lower taxes.
BSE Sensex
35,332
Nifty
10,620
Lower tractor sales drag the overall top-line: The company’s top-line grew by
Reuters Code
MAHM.BO
~6% yoy to `12,989cr on the back of volume growth (up ~4% yoy) and
Bloomberg Code
MM.IN
realization improvement (up ~2.3% yoy). Top-line was subdued mainly because
of delayed festive season. On segment wise performance, farm equipment
Shareholding Pattern (%)
segment grew by ~2% yoy during the quarter, whereas automotive segment
Promoters
21.6
reported a growth of ~9% yoy. Going forward, we expect automotive and farm
MF / Banks / Indian
9.9
equipment segments to perform better on back of positive rural sentiment and
FII / NRIs / OCBs
34.0
Indian Public/Others
34.5
government's push for infra & construction projects.
Profitability driven by strong revenue growth and lower interest cost: On the
Abs.(%)
3m
1yr
3yr
operating front, the company’s margin contracted by 162bps yoy to 12.4% due to
Sensex
(7.2)
6.7
36.4
lower volume growth, commodity cost pressure and new launch expenses.
M&M
(19.1)
7.8
20.4
However, M&M reported ~26% yoy rise in its net profit to `1,649cr on the back
one time exceptional income (`134cr) and lower taxes.
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
Historical share price chart
models) and strong growth in tractors segment driven by strong brand recall and
1,200
improvement in rural sentiment. Further, on the bottom-line front, we expect
1,000
CAGR of ~22% to `5,991cr over the same period on the back of margin
800
improvement. Thus, we recommend BUY on the stock with target price of `1,050.
600
Key Financials
400
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
200
Net sales
44,054
48,686
54,939
62,235
0
% chg
7.8
10.5
12.8
13.3
Adj. Net profit
3,220
4,046
5,021
5,991
% chg
0.4
25.7
24.1
19.3
Source: Company, Angel Research
EBITDA margin (%)
10.2
12.8
13.0
13.0
EPS (`)
27.1
34.0
42.2
50.4
Amarjeet S Maurya
022-40003600 Ext: 6831
P/E (x)
28.5
22.7
18.3
15.3
P/BV (x)
3.6
3.0
2.7
2.4
RoE (%)
12.5
13.4
14.7
15.4
RoCE (%)
10.5
14.3
14.6
15.0
EV/Sales (x)
1.7
1.5
1.3
1.2
EV/EBITDA (x)
16.6
11.4
10.3
9.0
Source: Company, Angel Research Note
Please refer to important disclosures at the end of this report
1
Mahindra & Mahindra| 2QFY2019 Result Update
Exhibit 1: 2QFY2019 Performance
Y/E March (` cr)
2QFY19
2QFY18
% yoy
1QFY19
% qoq
1HFY19
1HFY18
% chg
Net Sales
12,989
12,184
6.6
13,520
(3.9)
26,508
24559.3
7.9
Consumption of RM
9256.1
8,410.29
10.1
9556.6
(3.1)
18812.7
17627.1
6.7
(% of Sales)
71.3
69.0
70.7
71.0
71.8
Staff Costs
742
705
5.2
752
(1.3)
1,493
1411.8
5.8
(% of Sales)
5.7
5.8
5.6
5.6
5.7
Other Expenses
1,386
1,366
1.5
1,340
3.4
2,726
2544.2
7.1
(% of Sales)
10.7
11.2
9.9
10.3
10.4
Total Expenditure
11,384
10,481
8.6
11,648
(2.3)
23,032
21,583
6.7
Operating Profit
1,605
1,703
(5.7)
1,872
(14.2)
3,477
2,976
16.8
OPM
12.4
14.0
13.8
13.1
12.1
Interest
28
23
21.1
33
(15.5)
60.4
54.6
10.7
Depreciation
461
363
27.0
393
17.4
854.4
710.8
20.2
Other Income
846
562
265
1111.3
766.6
PBT (excl. Ext Items)
1,962
1,878
4.5
1,711
14.7
3,673
2,977
23.4
Ext (Income)/Expense
134
20.9
155.0
PBT (incl. Ext Items)
2,096
1,878
11.6
1,732
21.0
3,828
2,977
28.6
(% of Sales)
16.1
15.4
12.8
14.4
12.1
Provision for Taxation
447
574
511
958
896
6.8
(% of PBT)
21.3
30.5
29.5
25
30
Reported PAT
1,649
1,305
26.4
1,221
35.1
2,870
2,081
37.9
PATM
12.7
10.7
9.0
10.8
8.5
Source: Company, Angel Research
November 15, 2018
2
Mahindra & Mahindra| 2QFY2019 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 ~22% to `5,991cr 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 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: 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.
November 15, 2018
3
Mahindra & Mahindra| 2QFY2019 Result Update
Standalone 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
47,797
54,144
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
5,549
6,286
EBITDA
4,515
6,224
7,142
8,090
% chg
(2.3)
37.9
14.7
13.3
(% of Net Sales)
10.2
12.8
13.0
13.0
Depreciation& Amortisation
1,526
1,479
1,701
1,805
EBIT
2,988
4,745
5,441
6,286
% chg
(15.9)
58.8
14.7
15.5
(% of Net Sales)
6.8
9.7
9.9
10.1
Interest & other Charges
160
112
118
124
Other Income
1,894
1,470
1,750
1,700
(% of PBT)
40.1
24.1
24.7
21.6
Share in profit of Associates
-
-
-
-
Recurring PBT
4,723
6,102
7,072
7,861
% chg
10.2
29.2
15.9
11.2
Tax
1,079
1,746
2,051
1,870
(% of PBT)
22.9
28.6
29.0
23.8
PAT (reported)
3,643
4,356
5,021
5,991
Extraordinary Items
423
310
-
-
ADJ. PAT
3,220
4,046
5,021
5,991
% chg
0.4
25.7
24.1
19.3
(% of Net Sales)
7.3
8.3
9.1
9.6
Basic EPS (Rs)
27.1
34.0
42.2
50.4
Fully Diluted EPS (`)
27.1
34.0
42.2
50.4
% chg
0.4
25.7
24.1
19.3
November 15, 2018
4
Mahindra & Mahindra| 2QFY2019 Result Update
Standalone Balance Sheet
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
297
595
595
595
Reserves& Surplus
25,373
29,699
33,616
38,289
Shareholders Funds
25,670
30,294
34,211
38,884
Total Loans
2,816
2,958
2,958
2,958
Deferred Tax Liability
1,637
1,767
1,767
1,767
Total Liabilities
30,122
35,019
38,935
43,609
APPLICATION OF FUNDS
Gross Block
14,938
16,878
16,938
17,938
Less: Acc. Depreciation
7,303
9,019
10,720
12,525
Net Block
7,635
7,859
6,218
5,413
Capital Work-in-Progress
2,038
3,129
3,129
3,129
Investments
17,902
20,583
17,902
17,902
Current Assets
11,764
15,846
20,759
27,404
Inventories
2,716
2,702
3,612
4,433
Sundry Debtors
2,918
3,173
4,214
5,115
Cash
1,687
2,894
3,043
4,164
Loans & Advances
1,528
3,769
5,494
7,468
Other Assets
2,914
3,309
4,395
6,223
Current liabilities
10,158
13,887
10,562
11,728
Net Current Assets
1,605
1,958
10,197
15,676
Deferred Tax Asset
942
1,489
1,489
1,489
Mis. Exp. not written off
-
-
-
-
Total Assets
30,122
35,019
38,935
43,609
November 15, 2018
5
Mahindra & Mahindra| 2QFY2019 Result Update
Standalone Cashflow Statement
Y/E March (` cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
4639
5669
7072
7861
Depreciation
1327
1479
1701
1805
Change in Working Capital
(31)
1780
(8090)
(4358)
Interest / Dividend (Net)
(834)
112
0
0
Direct taxes paid
0
(1289)
(2051)
(1870)
Others
(138)
(725)
0
0
Cash Flow from Operations
4964
7027
(1367)
3439
(Inc.)/ Dec. in Fixed Assets
(2060)
(2669)
(1000)
(1000)
(Inc.)/ Dec. in Investments
(1160)
(2441)
0
0
Cash Flow from Investing
(3221)
(5110)
(1000)
(1000)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
0
0
0
0
Dividend Paid (Incl. Tax)
(839)
(923)
(1105)
(1318)
Interest / Dividend (Net)
(59)
3834
0
0
Cash Flow from Financing
(898)
2911
(1105)
(1318)
Inc./(Dec.) in Cash
845
4828
(3472)
1121
Opening Cash balances
842
1687
6515
3043
Closing Cash balances
1687
6515
3043
4164
November 15, 2018
6
Mahindra & Mahindra| 2QFY2019 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
28.5
22.7
18.3
15.3
P/CEPS
17.7
15.7
13.6
11.8
P/BV
3.6
3.0
2.7
2.4
Dividend yield (%)
0.8
1.0
1.2
1.4
EV/Sales
1.7
1.5
1.3
1.2
EV/EBITDA
16.6
11.4
10.3
9.0
EV / Total Assets
2.5
2.0
1.9
1.7
Per Share Data (`)
EPS (Basic)
27.1
34.0
42.2
50.4
EPS (fully diluted)
27.1
34.0
42.2
50.4
Cash EPS
43.4
49.0
56.5
65.5
DPS
6.0
7.5
9.3
11.1
Book Value
215.7
254.6
287.5
326.8
Returns (%)
ROCE
10.5
14.3
14.6
15.0
Angel ROIC (Pre-tax)
33.6
48.5
33.5
31.8
ROE
12.5
13.4
14.7
15.4
Turnover ratios (x)
Asset Turnover (Gross Block)
2.9
2.9
3.2
3.5
Inventory / Sales (days)
22
20
24
26
Receivables (days)
24
24
28
30
Payables (days)
53
58
45
44
Working capital cycle (ex-cash) (days)
(7)
(14)
7
12
November 15, 2018
7
Mahindra & Mahindra| 2QFY2019 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.
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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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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
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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%)
November 15, 2018
8
