9 November 2019
Q2FY20 Results Update | Sector: Automobiles
Mahindra & Mahindra
BSE SENSEX
40,324
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
11,908
MM IN
1,209
721.1 / 10.1
814 / 503
-5/-15/-41
2468
81.1
CMP: INR580
TP: INR680 (+17%)
Buy
Above est.; Superior operating performance despite weak volumes
Total volumes declined ~16% YoY. Realizations grew 2.1% YoY to ~INR571.3k
(v/s est. ~INR580.2k). Net revenues (incl. MVML) declined 14.5% to ~INR109.4b
(v/s est. ~INR111b). EBITDA margins declined 40bp YoY (flat QoQ) to 14.1% (v/s
est. 12.2%). Margin beat was driven by better mix, price increases and lower
RM costs. PBIT margins for Autos declined ~210bp YoY (-70bp QoQ) to 5.8%
and for Tractors, it declined 90bp YoY (flat QoQ) to 19.3%. Adj. PAT declined
19% YoY to ~INR13.5b (v/s est. ~INR14.7b). It is yet to adopt new tax regime.
1HFY20 revenue/EBITDA/PAT has grown -9%/-16%/19%. CFO in 1HFY20 has
declined ~90% due to weak operating performance and increase in working
capital. With capex (incl. investments in subsidiaries) stable at ~INR27.9b, FCFF
was negative at ~INR26.5b (v/s -INR11.5b in 1HFY19).
Takeaways from the earnings call: (a)
MM’s festive season retail sales for
Tractor declined 4%, while it grew 23% for the Auto segment; (b) 2HFY20 PV
industry outlook - UVs to grow 12-13%, cars to decline 8-10% and overall PVs
to decline 5-6%; (c) Tractors should decline 7-8% (v/s earlier guidance of up to
5% decline) in FY20; (d) Inventory – Autos 5-6k units short of target and
Tractors are at targeted level but would further reduce by 1-1.5k in 3QFY20;
and (e) It has reduced discounts in Auto segment post the festive season.
Valuation and view:
We are upgrading our EPS estimates by 8-9% to factor in
the strong margins. M&M’s UV business is facing cyclical headwinds, along with
rise in competitive intensity. Further, we expect it to face headwinds in the
diesel portfolio during the BS6 transition. The stock trades at implied core P/E
of ~11.3x/10.4x. Maintain
Buy
with TP of ~INR680 (Sep’21 SOTP-based).
(INR Million)
FY20E FY20
2QE
8,06,800 1,91,390
-14.1 -16.3
5,75,250 5,80,225
2.2
3.7
4,64,112
1,11,049
-12.2
-13.2
66.8 68.4
7.6
7.3
12.0 11.7
64,495 13,575
13.9 12.2
16,833
8,265
375
1,416
23,845
5,875
69,738
15,590
6.0
22.4
54,150
14,655
40,733
14,655
-24.8
-12.4
Financials & Valuations (INR b)
Y/E Mar
2019 2020E 2021E
Sales
536.1 469.9 524.0
EBITDA
66.4 58.5
65.3
NP (incl. MVML) 54.2 40.7
44.3
Adj. EPS (INR) *
45.5 34.2
37.1
EPS Gr. (%)
25.3 -24.8
8.6
BV/Sh. (INR)
287
320
344
RoE (%)
14.9 11.3
10.2
RoCE (%)
13.9 10.6
9.7
P/E (x)
12.8 17.0
15.6
Cons. P/E (x)
13.6 16.6
14.7
P/BV (x)
2.0
1.8
1.7
* incl. MVML
Estimate change
TP change
Rating change
Quarterly Performance (incl MVML)
Y/E March
FY19
1Q
2Q
3Q
4Q
Total Volumes (nos)
2,40,884 2,28,590 2,34,001 2,35,557
Growth YoY (%)
19.1
3.7
10.9
-2.2
Net Realization
5,54,527 5,59,524 5,50,959 5,86,180
Growth YoY (%)
3.1
2.6
1.2
5.7
Net Op. Income
1,33,577 1,27,902
1,28,925 1,38,079
Growth YoY (%)
12.2
3.4
22.8
6.4
RM Cost (% of sales)
67.4
67.6
69.2
68.3
Staff (% of sales)
6.6
5.5
6.3
6.5
Oth. Exp. (% of Sales)
10.4
11.2
11.0
12.5
EBITDA
21,101
18,493 17,029 18,678
EBITDA Margins (%)
15.8
14.5
13.2
13.5
Other income
3,423
2,473
1,930
8,478
Interest
353
304
431
379
Depreciation
5,054
5,696
4,295
4,986
PBT
18,550
22,981
14,245 14,103
Effective Tax Rate (%)
2.0
31.3
32.2
22.6
Reported PAT
9,692
12,572
17,788
13,960
Adj PAT
12,383
16,725
14,578 10,502
Change (%)
40.7
-15.2
64.7
18.7
1Q
2,18,039
-9.5
5,87,302
5.9
1,28,055
-4.1
67.9
6.8
11.2
17,936
14.0
1,919
302
5,839
27,384
17.5
22,597
9,180
-25.9
FY20
FY19
2Q
3QE
4QE
1,91,390 2,15,929 1,81,442 9,39,032
-16.3
-7.7
-23.0
8.1
5,71,349 5,60,195 5,82,798 5,62,795
2.1
1.7
-0.6
2.8
1,09,351
1,20,962 1,05,744
5,28,482
-6.2
-23.4
-14.5
11.1
66.0
66.2
66.9
68.1
7.2
8.0
7.4
6.2
12.3
11.9
12.2
11.4
15,408
17,768 13,384
75,301
14.1
14.7
12.7
14.2
3,270
3,419
8,225
16,303
394
389
331
1,467
5,950
6,335
5,721
20,030
17,582
14,694 10,078
69,879
27.3
27.4
22.9
22.7
7,315
13,548
10,690
54,012
7,315
13,548
10,690
54,187
-26.7
-30.3
-19.0
25.4
Jinesh Gandhi - Research analyst
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Aanshul Agarawal - Research analyst
(Aanshul.Agarawal@MotilalOswal.com); +91 22 7193 4337
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Mahindra & Mahindra
Record high auto realizations at INR606k/unit
Total volumes declined ~16.3% YoY, with tractors volumes declining by 8% YoY
while UV volume declined ~22% YoY.
Net realizations grew ~2.1% YoY to ~INR571.3k (v/s est ~INR580.2k).
Realizations for auto business grew 2.7% YoY (-4.9% QoQ) whereas Tractor
business grew 2% YoY (flat QoQ).
Net revenues (M&M+MVML) declined ~14.5% to ~INR109.4b (v/s est
~INR111b).
Exhibit 2: Trend in passenger UV market share
Market Share (%)
Exhibit 1: Trend in passenger UV volumes
UV Volumes Domestic (Units)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 3: Trend in tractor volumes
Tractors Volumes (Units)
Exhibit 4: Trend in tractor market share
Market Share (%)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 5: Trend in auto realizations
Auto Realization (INR '000)
Exhibit 6: Trend in FES realizations
FES Realization (INR '000)
Source: Company, MOFSL
Source: Company, MOFSL
9 November 2019
2
 Motilal Oswal Financial Services
Mahindra & Mahindra
Lower RM costs boost margins
EBITDA margins at 14.1% (v/s es.t 12.2%), declined ~180bp YoY (+50bp QoQ).
Margin beat was driven by better mix, price increases and lower RM cost.
EBITDA declined ~17% YoY (-14.1% QoQ) to ~INR15.4b (v/s est ~INR13.6b).
PBIT margins for Autos declined ~200bp YoY (-230bp QoQ) to 6.5%, impacted by
negative operating leverage though gross margins were stable.
PBIT margins for Tractors declined 80bp YoY (flat QoQ) to 19.3%, impacted by
negative operating leverage.
PBT at ~INR17.6b (v/s est. ~INR15.6b) declined ~24% YoY (-36% QoQ).
Adj. PAT declined 19% YoY to ~INR13.5b (v/s est ~INR14.7b). It is yet to adopt
new tax regime at standalone entity, whereas it has shifted to new regime at
MVML.
Exhibit 8: Trend in S/A and M&M (incl. MVML) margins
M&M EBITDA (%)
M&M+MVML EBITDA (%)
Exhibit 7: Trend in EBITDA margin
EBITDA (INR m)
M&M+MVML EBITDA (%)
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FY17
FY18
FY19
FY20
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FY17
FY18
FY19
FY20
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 9: Trend in Auto PBIT margins
AUTO PBIT margins (%)
10.6
10.39.8
9.7
9.6
9.4 9.4
8.4
7.9
7.9
7.1
7.2
6.8
Exhibit 10: Trend in FES PBIT margins
FES PBIT margins (%)
8.8
5.8
6.5
5.8
19.8
21.3 20.520.9
20.2
19.4
20.9
19.3
19.2 19.3
20.0
17.8 18.4
16.2
16.1
15.4
14.2
Source: Company, MOFSL
Source: Company, MOFSL
9 November 2019
3
 Motilal Oswal Financial Services
Mahindra & Mahindra
Earnings call highlights
M&M’s
festive season retail sales
for Tractors declined 4%, while it grew 23%
for the Auto segment. Since the company had witnessed sudden drop in retails
(except tractors) during the last festive season, the growth is good for Autos. It
estimates PV industry volume growth at 14-15% during the festive season.
Inventory
for Auto segment is 5-6k lower than normal and is the lowest in five
years. For Tractors, it is at normal level; it would further reduce by 1-1.5k in
3QFY20.
PV industry 2HFY20 outlook:
UVs should grow 12-13% (due to new products),
cars should decline 8-10% and overall, PVs should decline 5-6%.
Tractor industry FY20 guidance
is of 7-8% decline (v/s earlier guidance of up to
5% decline) as company expects Nov’19 to be satisfactory, Dec’19-Jan’20 should
be slow, but Feb-Mar 2020 is expected to be strong.
CV industry volumes are expected to remain weak as availability of freight is
weak.
New product launches:
It plans to launch three new UVs in FY21, along with e-
KUV (4QFY20), e-XUV300 (1QFY22) and EV for last mile connectivity (3QFY21).
Discounts:
While the general discount in the auto industry during the festive
season was much higher, M&M had increased its discounts only by ~INR1,500
per vehicle on a YoY basis (INR3-4k QoQ increase). It has lowered discounts post
the festive season.
EVs:
Expect continued growth in retail of 600 Treo and 1,300 e-Alpha. Delhi,
Lucknow, Patna and Kolkata are key markets for these e-3Ws.
SCV/LCVs
will see substantial cost increase for BS6 diesel. M&M is also working
on other fuels like CNG and Petrol.
3Ws:
It expects 3W electrification to happen over the next 2-3 years. It sold
~600 Treo 3Ws and ~1300 e-Alphas in 2QFY20.
Jawa:
It has ramped up production to ~5k/month. Production ramp-up is
happening after some hiccups on the supply chain side. It has delayed launch of
Jawa Perak, which is now being launched on 15
th
Nov’19.
Ssangyong Motors:
It is impacted by the significant sudden drop in performance
in 1HFY20 due to adverse development in key export markets as well as
slowdown in the Korean market. This has resulted in variable marketing
expenses going up and impacting profitability. Going forward, focus would be on
material cost reduction and exploring new markets for exports. These initiatives
would start bearing fruit from CY20. SYMC’s break-even – EBITDA level at ~140k
annual volumes and PBT at ~155k annual volumes.
9 November 2019
4
 Motilal Oswal Financial Services
Mahindra & Mahindra
Valuation and view
Pick-up in monsoons could drive recovery in tractor demand:
Tractor demand
has been under pressure over last 9 months, impacted by weakness in pockets
due to poor monsoon last year, extended monsoon this year as well as liquidity
related issues. With monsoon catching up and ending on a positive note,
outlook for tractor has improved considerably. While we estimate tractor
volumes to decline ~6.5% in FY20E, we expect strong recovery in FY21 with
~12% growth. Further, we expect continued ramp-up in non-tractor
mechanization (implements, harvesters etc.), which should result in stronger
revenue growth over FY19-FY21E.
UVs – Medium-term challenges persist:
We expect headwinds for both pick-up
UVs (~21% of FY19 volumes) as well as passenger UVs due to on-going weak
demand environment as well as due to substantial price increase due to BS6
compliance. With ~50% market share in LCVs <3.5ton, M&M’s pick-up volumes
are estimated to decline ~4% CAGR over FY19-21E, whereas passenger UVs
volumes are estimated to decline ~16% CAGR over FY19-21. Passenger UVs
volumes are also impacted due to new competition viz Kia and MG Motors.
Compact SUVs key driver of UV industry, but competition to remain high:
UV
segment is expected to outgrow PV industry over next 3-5 years. However,
growth in UVs is expected to be driven by increasing acceptance of compact
SUVs by car buyers, while traditional UVs (M&M’s forte) could show cyclical
recovery in volumes. MM is responding to changing industry dynamics, it is this
time challenged by market leaders like Maruti and Hyundai in compact SUV
segment, where MM is a weak player. Also, competition from new players and
launches to further intensify competition in the segment. We estimate
profitability of MM’s UV business to be under pressure in medium term, as it
will have shorten product refresh cycle and adopt very aggressive pricing.
Valuation and view:
We are upgrading our EPS estimates by 8-9% to factor in
for strong margins. While MM would face transition risk to BS6 for diesel
portfolio, it is on track for having a complete gasoline powertrain for all UV
models by 2020. Also, competitive intensity has further increased, particularly in
core mid-sized SUV segment. On the other hand, an tractor demand outlook has
improved post good monsoon. As a result, we are estimating ~10% CAGR
decline in EPS for MM. These challenges are priced in as reflected in core
business implied valuation of 1~11.3x/10.4x FY20/21 EPS. Maintain
Buy
with TP
of ~INR680 (Sep-21 based SOTP).
Exhibit 11: Revised estimates
Rev
807
470
13.9
41
34
34.2
34.9
FY20E
Old
801
475
12.7
41
35
34.4
32.0
Chg (%)
0.8
-1.2
120bp
-0.8
-0.8
-0.7
9.1
Rev
849
524
14.1
41
34
37.1
39.5
FY21E
Old
841
529
13.0
42
35
37.3
36.6
Chg (%)
0.9
-1.0
110bp
-3.1
-3.1
-0.5
7.9
Source: MOFSL
Volumes ('000 units)
Net Sales
EBITDA (%, incl MVML)
Net Profit
EPS (INR)
EPS (INR, incl MVML)
Cons EPS (INR)
9 November 2019
5
 Motilal Oswal Financial Services
Mahindra & Mahindra
Exhibit 12: M&M – Sum-of-the-parts (INR/share)
EPS (MM+MVML)
PE attributable (x)
Value of core business
Value of subsidiaries @ Hold Co discount
1. Tech Mahindra
2. M&M Financial Services
3. Mahindra Lifespaces
4. Mahindra Holidays
5. Ssangyong
6. Mahindra CIE
7. CIE Automotive Spain
8. Mahindra Logistics
Target price (after 40% discount)
Upside (%)
Core PE (x)
FY20E
37.1
12.5
462
40
98
52
5
10
8
3
9
9
656
13.1
10.4
FY21E
41.0
12.5
511
40
98
52
5
10
8
3
9
9
705
21.5
9.4
Source: MOFSL
Exhibit 13: M&M: P/E trend
P/E (x)
Min (x)
32.0
22.3
22.0
12.0
2.0
10.2
12.6
17.4
16.5
Avg (x)
+1SD
28.1
Max (x)
-1SD
Exhibit 14: M&M: P/B trend
P/B (x)
Min (x)
4.8
4.0
3.8
2.8
1.8
0.8
2.4
1.6
1.7
3.4
2.9
Avg (x)
+1SD
Max (x)
-1SD
Source: Bloomberg, MOFSL
9 November 2019
6
 Motilal Oswal Financial Services
Mahindra & Mahindra
Operating metrics
Exhibit 15: Snapshot of Revenue model
000 units
Tractors
Growth (%)
% of total volumes
Uvs
Growth (%)
LCVs (MTBL)
Growth (%)
3-Ws
Growth (%)
Growth (%)
M&HCVs (MTBL)
Growth (%)
Total Autos
Growth (%)
% of total volumes
Total volumes
Growth (%)
Net Sales (INR b)
Growth (%)
FY16
214
-8.7
30.2
424
6.7
6
20.6
55
-3.2
62.5
6
15.0
494
6.3
69.8
708
1.3
404
6.6
FY17
263
23.1
34.6
437
3.1
8
18.7
52
-4.9
0.0
7
0.0
497
0.7
65.4
760
8.8
441
9.1
FY18
320
21.5
37.2
477
9.1
8
1.6
55
4.4
0.0
9
0.0
540
8.5
62.8
859
12.9
487
10.5
FY19
330
3.4
35.6
523
9.5
8
8.6
67
22.1
0.0
11
0.0
598
10.8
64.4
928
8.1
536
10.1
FY20E
309
-6.5
38.6
418
-20.0
7
-17.5
67
1.0
0.0
5
0.0
492
-17.6
61.4
801
-14.1
470
-12.4
FY21E
346
12.0
41.1
418
0.0
7
-5.0
72
7.0
0.0
6
0.0
497
0.9
58.9
843
5.2
524
11.5
Source: Company, MOFSL
9 November 2019
7
 Motilal Oswal Financial Services
Mahindra & Mahindra
Story in charts
Exhibit 16: Trend in tractor volumes
Tractor volumes (units)
Growth (%)
Exhibit 17: New product launches to drive UV sales
22.4
UVs (incl pick-ups)
Growth (%)
9.1
9.5
0.0
(20.0)
6.7
(8.9) (7.2)
3.1
FY13
FY14
FY15
FY16
FY17
FY18
FY19 FY20E FY21E
FY13
FY14
FY15
FY16
FY17
FY18
FY19 FY20E FY21E
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 18: Realization trend
Net realizations (INR/unit)
Exhibit 19: Trend in EBITDA margins
EBITDA (incl. MVML) (%)
13.9
14.8
14.2
13.5
12.5
13.5
13.1
13.9
14.1
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 20: Trend in return profile
RoE (%)
RoIC (%)
Exhibit 21: FCF to improve despite high capex plans
CFO
42.4
28
Capex
55.5
FCF
70.3
63.9
49.2
26
19
35
69.4
37.8
35.6
27
17
37
42.6
26
48
(14)
(10)
(20)
(22)
(21)
(27)
(30)
(35)
(40)
Source: Company, MOFSL
Source: Company, MOFSL
9 November 2019
8
 Motilal Oswal Financial Services
Mahindra & Mahindra
Financials and Valuations
Income Statement
Y/E March
Net Op. Income
Change (%)
Total Expenditure
EBITDA
Margins (%)
Margins (%, incl MVML)
Depreciation
EBIT
Deferred Revenue Exp.
Int. & Finance Charges
Other Income
Non-recurring Income
Profit before Tax
Tax
Eff. Tax Rate (%)
Adj. Profit after Tax
Change (%)
Adj. PAT (incl MVML)
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Deferred tax
Loans
Capital Employed
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr.Assets, L & Adv.
Inventory
Sundry Debtors
Cash & Bank Bal.
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOFSL Estimates
2017
4,40,535
7.8
3,95,388
45,147
10.2
13.1
15,264
29,883
0
1,596
13,455
5,485
47,226
10,792
22.9
32,203
2.1
35,133
2018
4,86,856
10.5
4,24,615
62,240
12.8
14.8
14,794
47,446
0
1,122
10,364
4,336
61,024
17,464
28.6
40,465
25.7
43,202
2019
5,36,140
10.1
4,69,744
66,396
12.4
14.2
18,604
47,792
0
1,134
16,890
-297
63,250
15,290
24.2
48,186
19.1
54,187
2020E
4,69,855
-12.4
4,11,388
58,467
12.4
13.9
22,295
36,173
0
1,116
17,483
13,671
66,210
14,699
22.2
40,876
(15.2)
40,733
(INR Million)
2021E
5,23,964
11.5
4,58,636
65,328
12.5
14.1
26,601
38,727
0
1,116
18,262
0
55,873
15,365
27.5
40,508
(0.9)
44,250
(INR Million)
2021E
5,958
4,04,322
4,10,280
6,341
24,803
4,41,425
3,12,320
1,71,200
1,41,119
10,000
2,45,321
1,86,707
37,521
34,452
44,454
10,766
59,513
1,41,723
86,131
41,236
14,355
44,985
4,41,425
0
2017
2,968
2,64,888
2,67,856
2,548
27,729
2,98,134
1,54,778
77,068
77,710
20,404
1,79,084
1,25,034
27,580
29,388
16,875
5,406
45,784
1,04,098
68,811
21,388
13,899
20,935
2,98,134
0
2018
5,950
2,96,991
3,02,941
2,772
28,644
3,34,357
1,82,295
1,03,700
78,594
31,287
2,05,830
1,58,457
27,017
31,730
28,937
10,182
60,591
1,39,811
86,034
38,485
15,292
18,646
3,34,357
(0)
2019
5,958
3,36,135
3,42,093
6,341
24,803
3,73,237
2,23,122
1,22,304
1,00,818
24,198
2,20,160
1,81,795
38,393
39,463
37,317
7,110
59,513
1,53,734
96,782
41,236
15,716
28,061
3,73,237
(0)
2020E
5,958
3,75,730
3,81,688
6,341
24,803
4,12,833
2,72,320
1,44,599
1,27,721
10,000
2,30,321
1,77,037
33,646
34,584
43,063
6,231
59,513
1,32,246
77,236
41,236
13,773
44,791
4,12,833
0
9 November 2019
9
 Motilal Oswal Financial Services
Mahindra & Mahindra
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Fully diluted EPS
FD EPS (incl MVML)
Consolidated EPS
Cash EPS
Book Value per Share
DPS
Payout (Incl. Div. Tax) %
Valuation (x)
P/E
Consolidated P/E
Cash P/E
EV/EBITDA
EV/Sales
Price to Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
ROIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Working Capital (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Int./Dividends Received
Depreciation & Amort.
Direct Taxes Paid
(Inc)/Dec in Wkg. Capital
Other Items
CF from Oper.Activity
Extra-ordinary Items
CF after EO Items
(Inc)/Dec in FA+CWIP
Free Cash Flow
(Pur)/Sale of Invest.
CF from Inv. Activity
Change in Net Worth
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOFSL Estimates
2017
27.1
29.6
27.4
40.0
225.6
6.5
12.3
19.6
21.2
14.5
7.1
0.7
2.6
1.1
13.1
12.4
30.7
24
23
57
17
1.5
0.1
2018
34.0
36.3
41.0
46.4
254.6
7.5
23.8
16.0
14.1
12.5
10.5
1.3
2.3
1.3
14.2
13.0
45.1
24
20
65
14
1.5
0.1
2019
40.4
45.5
42.7
56.1
287.1
8.5
24.5
12.8
13.6
10.3
9.8
1.2
2.0
1.5
14.9
13.9
45.3
27
26
66
19
1.4
0.1
2020E
34.3
34.2
34.9
53.0
320.3
10.0
26.9
17.0
16.6
10.9
11.1
1.4
1.8
1.7
11.3
10.6
25.5
27
26
60
35
1.1
0.1
2021E
34.0
37.1
39.5
56.3
344.3
10.0
34.2
15.6
14.7
10.3
9.9
1.2
1.7
1.7
10.2
9.7
20.7
24
26
60
31
1.2
0.1
(INR Million)
2021E
38,727
18,262
26,601
-15,365
1,198
69,423
0
69,423
-40,000
29,423
-15,000
-55,000
1,930
0
-1,116
-12,084
-11,270
3,153
43,063
46,385
2017
41,742
-9,800
15,264
-9,929
-508
332
37,100
5,485
42,585
-20,743
16,358
-7,076
-27,818
0
-1,742
-1,482
-8,391
-11,615
-2,333
22,870
20,705
2018
56,688
-8,084
14,794
-12,887
17,803
1,957
70,271
0
70,271
-26,688
43,583
-24,416
-51,104
0
592
-1,695
-9,230
-10,333
8,834
16,875
25,876
2019
63,547
-13,184
18,604
-14,341
-5,060
-327
49,239
0
49,239
-30,316
18,923
4,829
-25,487
0
-3,725
-1,710
-10,117
-15,552
8,199
28,937
37,137
2020E
36,173
17,483
22,295
-14,699
-10,984
50,269
13,671
63,939
-35,000
15,269
-10,160
-45,160
1,930
0
-1,116
-12,084
-11,270
-6,162
37,317
31,323
9 November 2019
10
 Motilal Oswal Financial Services
Mahindra & Mahindra
Corporate profile
Company description
M&M is the market leader in UV and tractors, with
market share of over 40% in both segments. It also
has presence into CVs, 3-wheelers and 2-wheelers
segments. Also, Ssangyong, it subsidiary in South
Korea is focused on SUV segment in global markets.
Apart from core auto business, it has subsidiaries/
associates in various businesses like IT, NBFC, Auto
ancillaries, hospitality, infrastructure etc.
Source: MOFSL/Bloomberg
Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Sep-19
Promoter
DII
FII
Others
18.9
26.7
41.5
12.9
Jun-19
18.9
23.1
41.9
16.1
Sep-18
20.5
20.3
42.1
17.2
Exhibit 3: Top holders
Holder Name
Life Insurance Corporation Of India
Alongwith Its Sub Accounts
First State Investments Icvc- Stewart
Investors Asia Pacific Leaders Fund
SBI FUND Along With Its Sub-Accounts
Caisse De Depot Et Placement Du Quebec
ICICI PRUDENTIAL FUND Along With Its Sub-
Accounts
% Holding
10.8
4.1
2.5
1.9
1.4
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Anand Mahindra
Keshub Mahindra
Pawan Goenka
Narayan Shankar
Designation
Executive Chairman
Chairman Emeritus
Managing Director
Company Secretary
Exhibit 5: Directors
Name
Haigreve Khaitan
M M Murugappan
N B Godrej
Shikha Sharma
Name
T N Manoharan
Vikram Singh Mehta
Vishakha N Desai
Vijay Kumar Sharma
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Type
Exhibit 7: MOFSL forecast v/s consensus
Cost Auditor
Secretarial Audit
Statutory
EPS
(INR)
FY20
FY21
MOFSL
forecast
34.9
39.5
Consensus
forecast
40.8
40.9
Variation
(%)
-14.5
-3.5
Source: Bloomberg
Source: Capitaline
D C Dave & Co
Sachin Bhagwat
B S R & Co LLP
9 November 2019
11
 Motilal Oswal Financial Services
Mahindra & Mahindra
NOTES
9 November 2019
12
 Motilal Oswal Financial Services
Mahindra & Mahindra
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
9 November 2019
13
 Motilal Oswal Financial Services
Mahindra & Mahindra
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or
licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
9 November 2019
14