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Mahindra & Mahindra’s (M&M’s) Q4FY21 outcomes have been barely beneath consensus estimates as Ebitda margin got here in at 14.7% (down 227bps q-o-q). Margins have been dragged by the automotive section (Ebit margin: 5%, down 243bps), whereas FES was resilient (Ebit margin: 22%, down 139bps). Administration shared a brand new product plan (5-years) for SUVs (9 merchandise) /LCVs (14 merchandise); pure EV choices (6 merchandise) would even be developed.
Investments into electrical (Rs 30 bn) sign readability of technique as M&M would be capable to construct a studying curve benefit vis-a-vis home friends who’re funding shy on EVs. Mahindra & Mahindra administration’s aggression to realize market share in FES enterprise is prone to sound candy to buyers and their long-term development outlook additionally stays bullish (15-20% CAGR over the following 3-5 years). Valuations stay enticing. Keep Purchase.
Key highlights of the quarter: Revenues in Q4FY21 grew 48% y-o-y to ~Rs 133 bn as a result of ~60% enchancment in FES income, whereas automotive gross sales grew ~43%. Ebitda margin improved 107bps to 14.7% at the same time as gross margin confronted headwinds (commodity rise, regulatory prices) and dropped to 30.8% (down 487bps). Superior fastened value discount supported margins (different bills down 399bps y-o-y). Adj. PAT jumped 211%. M&M took an impairment cost of ~Rs 8.8 bn.
Keep BUY: The change in administration and the evolution of centered capital allocation technique (RoE>18%) has been effectively appreciated by buyers. The technique now’s getting into development acceleration section; we count on H2 to witness robust pick-up throughout PVs (led by new launches) as supply-chain woes fade away.
We revise our EPS estimates by -1%/2.8% for FY22e/23e, respectively, keep our goal a number of at 8.5x FY23e Ebitda (Rs 710/share) and worth subsidiaries at Rs 330/share to reach at SoTP-based goal worth of Rs 1,040/share (earlier: Rs 1,045). We keep Purchase on the inventory.
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