Prabhudas Lilladher is bullish on Mahindra and Mahindra has recommended buy rating on the stock with a target price of Rs 1061 in its research report dated November 10, 2021.
Broker Research
November 10, 2021 / 02:15 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.
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Prabhudas Lilladher’s research report on Mahindra and Mahindra
M&M posted a decent operating performance amidst challenging RM scenario. 2QFY22 EBITDA margin came below our estimates and impacted raw material inflation as well as weak mix. Despite sharp price hikes taken by the company, tractor segment’s EBIT margin came in at 18.7% (-570/-160bps YoY/qoq) while automotive segment was at 2.7% (-380/+100bps YoY/Qoq). However, new product launches in automotive segment are seeing good traction with ~70k+ bookings for XUV700 and overall orderbook of ~160k units. Management mentioned that due to erratic monsoons, price hikes and higher base tractor demand is seeing some moderation and expect flat to low single digit growth in FY22. Thus focus is on farm machinery segment with an intention to make it ~10x by FY27. We continue to remain positive considering 1) baton of growth shifting from tractor to automotives gaining traction in Farm machinery businss 2) strong product pipeline in UVs and tractors to help outperform industry and 3) improved captial allocation to improve return matrix.
Outlook
We increase FY23/24 EPS by 1%/ 4% to factor in volume growth and cost control initiatives. Maintain ‘BUY’ with revised SoTP based TP of Rs 1,061 (v/s Rs978), built on target multiple of 18x for core business (unchanged).
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