Expect 1430-1450 only sustaining above 1320;
Otherwise 1250-1220 may be again on the card
CMP: 1288
Sell: 1300-1310
TGT: 1250-1210*-1170 (1-3M)
TSL>1320
Note: Consecutive closing above 1320 for any reason, M&M may scale up to 1382-1430-1450 in short to mid term with 1285 being an important support zone. In that alternative scenario, sell positions may be reversed.
Q2FY16 result of M&M was largely inline with street estimates. Q2 PAT was around Rs.924 cr against consensus of around Rs.928 cr (YOY-947 & QOQ-852).
Q2 EPS was at 14.87 against expectation of 14.66 (YOY-15.33 & QOQ-13.72).
Tepid Q2 PAT (down by 2.4% YOY) was attributed to sluggish tractor business (due to erratic rains this year and subdued rural economy) and higher tax cost.
As par the management, UV & LCV segment was under pressure registering de-growth in Q2, but MHICV continued to grow on the back of improved industrial activity, momentum in infra projects and some replacement demands.
The company is hopeful for growth in H2FY16 amid hopes of investment sentiment revival due to falling interest rate and uptick in urban consumption; but expecting 5% negative growth in tractor sales in FY-16.
The management is hopeful of revival in rural sales in the coming quarters as sowing of rabi (winter) corp has started well.
Q2 EBITDA was increased by around 1.7% YOY and OM expanded by 0.4% to 11.1% on the back of 7.5% YOY fall in raw material cost.
Analysts are also attributing the decent Q2 performance of M&M for successful launch of some of its new models (TUV-300) recently.
Going ahead, M&M will launch various models across SUV, CUV, UV segments and very optimistic about sales growth.
No doubt, M&M is a good auto stock for portfolio investment. It also rallied recently by around 20% from Sep low.
(http://asisghosh.blogspot.in/2015/04/mahindra-mahindra-m-battling-for-3-rd.html)
Recent news flow of bumper "Dhanteras" sales of 11500 vehicles in a day (up by almost 70%), 7-th pay commission recommendations (which is positive for auto sector) etc is also positive for the M&M.
But considering the recent price & time action, these news may be already digested by the market to a great extent. Thus some retracements can happen from this strong supply zone of 1300-1310 and one can accumulate it around 1210 area for favorable risk reward ratio.
Q2FY16 result of M&M was largely inline with street estimates. Q2 PAT was around Rs.924 cr against consensus of around Rs.928 cr (YOY-947 & QOQ-852).
Q2 EPS was at 14.87 against expectation of 14.66 (YOY-15.33 & QOQ-13.72).
Tepid Q2 PAT (down by 2.4% YOY) was attributed to sluggish tractor business (due to erratic rains this year and subdued rural economy) and higher tax cost.
As par the management, UV & LCV segment was under pressure registering de-growth in Q2, but MHICV continued to grow on the back of improved industrial activity, momentum in infra projects and some replacement demands.
The company is hopeful for growth in H2FY16 amid hopes of investment sentiment revival due to falling interest rate and uptick in urban consumption; but expecting 5% negative growth in tractor sales in FY-16.
The management is hopeful of revival in rural sales in the coming quarters as sowing of rabi (winter) corp has started well.
Q2 EBITDA was increased by around 1.7% YOY and OM expanded by 0.4% to 11.1% on the back of 7.5% YOY fall in raw material cost.
Analysts are also attributing the decent Q2 performance of M&M for successful launch of some of its new models (TUV-300) recently.
Going ahead, M&M will launch various models across SUV, CUV, UV segments and very optimistic about sales growth.
No doubt, M&M is a good auto stock for portfolio investment. It also rallied recently by around 20% from Sep low.
(http://asisghosh.blogspot.in/2015/04/mahindra-mahindra-m-battling-for-3-rd.html)
Recent news flow of bumper "Dhanteras" sales of 11500 vehicles in a day (up by almost 70%), 7-th pay commission recommendations (which is positive for auto sector) etc is also positive for the M&M.
But considering the recent price & time action, these news may be already digested by the market to a great extent. Thus some retracements can happen from this strong supply zone of 1300-1310 and one can accumulate it around 1210 area for favorable risk reward ratio.
Considering the expected economic recovery in India and favorable young demography, demand of SUV/CV may be incrementally positive. Also forthcoming state elections in WB/UP etc may help in for sequentially higher demand for UV also. But reduced price gap between petrol & diesel and overall fuel efficiency and maintenance cost metrics between a petrol & diesel car, appeal of diesel car in PV segment may be reducing to some extent.
Technically, consecutive closing above 1435-1450, long term target of M&M may be around 1650-1780.
As par BG metrics and current market parameters:
(on standalone TTM & FWD EPS basis)
Current median valuation of M&M may be around: 1290 (FY:15/TTM)
Projected fair valuation might be around: 1380-1465-1615 (FY:16-18//FWD)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | Low | High | Median | 200-DEMA | 10-DEMA |
| M&M | 47.21 | 310.09 | 28 | 1283.71 | 1293.83 | 1288.77 | 1246.64 | 1266.38 |
| M&M | 53.8 | 356.75 | 28 | 1370.38 | 1381.19 | 1375.78 | 1246.64 | 1266.38 |
| M&M | 60.85 | 410.25 | 28 | 1457.40 | 1468.90 | 1463.15 | 1246.64 | 1266.38 |
| M&M | 73.95 | 471.95 | 28 | 1606.64 | 1619.31 | 1612.98 | 1246.64 | 1266.38 |
Analytical Charts:
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