Friday, 7 August 2015

Mahindra and Mahindra – Weekender Idea

Mahindra & Mahindra Ltd. manufactures automobiles, farm equipment and automotive components. The Company's automobile products include light, medium and heavy commercial vehicles, jeep type vehicles and passenger cars. Mahindra & Mahindra also manufactures agricultural tractors, agricultural implements, internal combustion engines, industrial petrol engines, spare parts and machine tools.

Although it appears to be an auto company, M&M is more of a conglomerate with stakes in various industries. Please see chart below. Almost half of the value of M&M comes from stakes in its subsidiaries such as Tech Mahindra, M&M Financial, Mah Life Spaces, Mahindra Holidays etc.

M&M Stake %
INR Per Share of M&M
Tech Mahindra
M&M Financial
Mahindra Life-Spaces
Mahindra CIE
Mahindra Holidays
Ssangyong Korea

Mkt Value of Core Business


Core Business
M&M’s core business is focused on utility vehicles and farm equipment. The M&M utility vehicle portfolio has lost a lot of market share in the last few years from 55% to currently 37%. They have lost market share due to lack of recent launches and competition from Ford Ecosport and Duster. Last quarter, the tractor volumes show the sharpest declines due to slowdown in rural consumption.

Future Prospects
Despite the slowdown in overall auto industry, M&M has maintained revenue growth of 16%. M&M has clearly highlighted that FY16E would be an aggressive launch year, which has already begun with the launch of new XUV500. The company is expected to launch a new platform, a major refresh and a new variant launch in the first three quarters of FY16. The new platform will include two compact SUVs, with one focused on the rural market and other towards urban consumers. The compact SUV segment is expected to grow faster as customers take to it as an alternative to premium hatchbacks. Secondly, peers like GM and Renault have a weaker distribution network compared to M&M. We expect M&M to regain market share as volumes improve.

As far as tractor volumes go, we expect some traction in the rural economy given the monsoon has panned out well and rural wage inflation has bottomed out.

The core business trades at 8-9x earnings and has the potential to surprise on the upside in the coming quarters. The company is run by one of the best management teams in India and this stock is a must for your long term portfolio. In the short term expect a 14-15% move. 

Disclaimer: This document is for information only and is meant for the use of the recipient & not for circulation. The information contained in this document has been taken from publicly available information, trade and statistical services & other sources. While the information contained herein is from sources believed to be reliable, we do not hold ourselves responsible for its completeness and accuracy. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. Investors are expected to use the information contained in this report at their own risk. This report is not and should not be construed as an offer or the solicitation of an offer to buy or sell any securities. M/s Latin Manharlal Securities Pvt. Ltd. and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discussed herein and may sell them to or buy them from customers on a principal basis.


Registered Office: 5th Floor, 124 Viraj, S.V Road, Khar (W), Mumbai 400 052.
 Visit:                       Call: 02240824082                     Mail:

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