14 june 2020 results review 4qfy20 mahindra & mahindra

14 June 2020 Results Review 4QFY20

Mahindra & Mahindra

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Taking bold decisions

M&M has taken the bold decision of scaling down investments in loss

making global subsidiaries. The co took a write down of Rs 35.8bn in 4Q,

largely for SsangYong and GenZe. The management is also segregating loss

making businesses into 3 categories and will not hesitate in shutting down the

non-profitable ones. M&M’s capital allocation in global subsidiaries was

weighing on return ratios and impacting valuations. These measures signal a

welcome shift in the strategic thinking at the company.

4QFY20 Financials – Operational beat: Automotive/tractor volumes were

down 47/3% YoY. Revenues declined 35% YoY to Rs 90bn. EBITDA margin

at 13.6% (flat YoY) surprised positively (vs our estimates of 10.6%) led by

improved profitability at the tractor division with EBIT margins of 17.6%

(+150bps YoY). The automotive segment is under pressure as margins

contracted 470/320bps YoY/QoQ to 4.1%. The co reported an exceptional loss

of ~Rs 35.8bn due to write down of investments in international subsidiaries

as highlighted above. Thus, adj. PAT came in at Rs 3.2bn (-70% YoY).

Call takeaways: (1) M&M is willing to cede control of the loss making South

Korean unit SsangYong and is looking at potential investors. M&M will

segregate its loss-making businesses into 3 categories – ones which have a

clear path towards profitability, ones with an unclear path to profitability

but having strategic importance and lastly the businesses with no clear path

to profitability or strategic importance. The company will exit businesses

falling in the final category. (2) However, M&M continues to invest in

domestic subsidiaries and will subscribe to the rights issue of Mahindra

Financial services (3) The Agri reforms (APMC, essential commodities act,

etc) introduced by the government will result in significant improvement in

farmer incomes over the next 3-5 years. Mahindra is well positioned to

benefit from this opportunity and expects the market for mechanized

equipment to evolve favorably (harvesters, rice transplanters). (4) The

company will launch new models including Project K2 – 4 platforms for 4

geographies – from 13HP-70HP tractors, along with Mitsubishi. For autos,

two new models W601, Z101 will come by early FY22 (5) However, M&M is

focusing on conserving cash and has scaled down capex guidance by 25% to

Rs 90bn over next 3 years. It will work closely with Ford for new projects.

Maintain ADD: We increase our FY21/22E EPS by ~7/8% to factor in the

better than expected margin outlook. We set a revised SOTP based Mar-22

TP of Rs 520. We increase the multiple for the core business to 13x (10x

earlier) due to (1) Improved outlook for Agri segment (2) Increased focus on

capital allocation. Key risks: Weak response to new models on the

downside, faster than expected economic recovery on the upside.

Financial Summary (M&M + MVML)

YE Mar (Rs mn) 4Q

FY20

4Q

FY19

YoY

(%)

3Q

FY20

QoQ

(%) FY18 FY19 FY20P FY21E FY22E

Net Sales 90,047 138,079 (34.8) 121,203 (25.7) 475,774 528,482 448,655 410,891 463,845

EBITDA 12,275 18,678 (34.3) 17,888 (31.4) 70,434 75,301 63,506 51,156 64,289

APAT 3,226 10,740 (70.0) 9,808 (67.1) 41,896 54,239 35,509 30,774 41,014

Adj. EPS (Rs) 2.7 9.0 (70.0) 8.2 (67.1) 35.2 45.5 29.8 25.8 34.4

APAT Growth(%)

24.1 29.5 (34.5) (13.3) 33.3

P/E (x)

14.4 11.2 17.1 19.7 14.8

RoE (%)

14.6 16.6 10.1 8.4 10.5

Source: Company, HSIE Research

ADD

CMP (as on 12 June 2020) Rs 508

Target Price Rs 520

NIFTY 9,973

KEY

CHANGES OLD NEW

Rating ADD ADD

Price Target Rs 410 Rs 520

EPS % FY21E FY22E

7% 8%

KEY STOCK DATA

Bloomberg code MM IN

No. of Shares (mn) 1,243

MCap (Rs bn) / ($ mn) 632/8,335

6m avg traded value (Rs mn) 2,458

52 Week high / low Rs 675/245

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) 20.1 (0.7) (19.6)

Relative (%) 17.0 16.1 (4.5)

SHAREHOLDING PATTERN (%)

Dec-19 Mar-20

Promoters 19.9 19.9

FIs & Local MFs 32.4 32.6

FPIs 34.0 33.9

Public & Others 13.8 13.6

Pledged Shares 0.3 0.6

Source : BSE

Aditya Makharia

[email protected]

+91-22-6171-7316

Mansi Lall

[email protected]

+91-22-6171-7357

Page | 2

Mahindra & Mahindra : Results Review 4QFY20

Quarterly Financial Snapshot: M&M + MVML

Particulars (Rs mn) 4Q

FY20

4Q

FY19

YoY

(%)

3Q

FY20

QoQ

(%) FY20 FY19 YoY (%)

Volumes (in units) 151,713 235,557 (35.6) 216,816 (30.0) 777,958 939,032 (17.2)

Net ASP (Rs/veh) 593,536 586,180 1.3 559,012 6.2 576,709 562,795 2.5

Net sales (incl OOI) 90,047 138,079 (34.8) 121,203 (25.7) 448,655 528,482 (15.1)

Material Expenses 57,898 94,286 (38.6) 81,591 (29.0) 298,668 359,977 (17.0)

Employee Expenses 7,127 7,568 (5.8) 8,300 (14.1) 32,237 32,830 (1.8)

Other Operating Expenses 12,748 17,547 (27.3) 13,425 (5.0) 54,245 60,375 (10.2)

Total Expenditure 77,773 119,401 (34.9) 103,315 (24.7) 385,150 453,182 (15.0)

EBITDA 12,275 18,678 (34.3) 17,888 (31.4) 63,506 75,301 (15.7)

Depreciation 6,172 5,696 8.3 5,900 4.6 23,631 20,030 18.0

EBIT 6,103 12,982 (53.0) 11,988 (49.1) 39,875 55,271 (27.9)

Other Income 3,155 2,473 27.6 2,092 50.8 15,391 16,303 (5.6)

Interest Cost 359 304 18.0 254 41.4 1,245 1,467 (15.1)

PBT & Exceptional items 8,899 15,151 (41.3) 13,826 (35.6) 54,021 70,106 (22.9)

Exceptional gain/(loss) (35,776) (1,047) 3,315.7 (6,006) 495.7 (28,112) (227) 12,278.5

PBT (26,877) 14,103 (290.6) 7,821 (443.7) 25,910 69,879 (62.9)

Tax 5,673 4,411 28.6 4,019 41.2 18,513 15,867 16.7

RPAT (32,550) 9,692 (435.8) 3,802 (956.2) 7,397 54,012 (86.3)

APAT 3,226 10,740 (70.0) 9,808 (67.1) 35,509 54,239 (34.5)

Adj EPS 2.7 9.0 (70.0) 8.2 (67.1) 29.8 45.5 (34.5)


Quarterly Performance Analysis: M&M + MVML

As % of sales 4Q

FY20

4Q

FY19 YoY (bps)

3Q

FY20 QoQ (bps) FY20 FY19 YoY (bps)

Material Expenses 64.3 68.3 (399) 67.3 (302) 66.6 68.1 (155)

Employee Expenses 7.9 5.5 243 6.8 107 7.2 6.2 97

Other Operating Expenses 14.2 12.7 145 11.1 308 12.1 11.4 67

Total Expenditure 86.4 86.5 (10) 85.2 113 85.8 85.8 9

EBITDA 13.6 13.5 10 14.8 (113) 14.2 14.2 (9)

RPAT (36.1) 7.0 (4,317) 3.1 (3,928) 1.6 10.2 (857)

APAT 3.6 7.8 (420) 8.1 (451) 7.9 10.3 (235)

Tax as % of PBT (21.1) 31.3 (5,238) 51.4 (7,249) 71.5 22.7 4,874


Segmental Data: M&M + MVML Revenue from Operations

(Rs mn)

4Q

FY20

4Q

FY19

YoY

(%)

3Q

FY20

QoQ

(%) FY20 FY19

YoY

(%)

Automotive Segment 55,058 102,217 (46.1) 74,238 (25.8) 278,083 346,152 (19.7)

Farm Equipment 31,110 32,059 (3.0) 42,778 (27.3) 154,025 168,747 (8.7)

Other Segments 4,518 4,696 (3.8) 4,757 (5.0) 19,377 17,251 12.3

EBIT (Rs mn) 4Q

FY20

4Q

FY19

YoY

(%)

3Q

FY20

QoQ

(%) FY20 FY19

YoY

(%)

Automotive Segment 2,253 9,002 (75.0) 5,417 (58.4) 17,824 27,823 (35.9)

Farm Equipment 5,488 5,187 5.8 8,309 (34.0) 29,262 32,651 (10.4)

Other Segments 89 76 17.9 168 (46.8) 727 508 43.2

Margins (%) 4Q

FY20

4Q

FY19

YoY

(bps)

3Q

FY20

QoQ

(bps) FY20 FY19

YoY

(bps)

Automotive Segment 4.1 8.8 (471) 7.3 (320) 6.4 8.0 (163)

Farm Equipment 17.6 16.2 146 19.4 (178) 19.0 19.3 (35)

Other Segments 2.0 1.6 36 3.5 (156) 3.8 2.9 81


In 4QFY20, Automotive

volumes declined 47% YoY.

Farm equipment volumes

declined by 3%

M&M is focusing on

conserving cash and has

scaled down capex

guidance by 25% to Rs

90bn over next 3 years

The company will launch

new models including

Project K2 – 4 platforms

for 4 geographies – from

13HP-70HP tractors, along

with Mitsubishi

M&M’s domestic tractor

market share expanded by

100bps to 41.2% in FY20

Page | 3


M&M+MVML Financials

Overall volumes remain affected in 4QFY20 due to 47%

fall in Automotive volumes

Blended realizations grew YoY owing to higher

volume share from tractors

Source: Company, HSIE Research Source: Company, HSIE Research

M&M+MVML Revenue EBITDA margin was flat YoY, was a positive surprise


Segmental volumes (in units) Segmental EBIT margins (%)


25

.6

19

.5

4.6

11

.3

(0.4

)

(9.5

)

(16

.3) (7

.3)

(35

.6)

-40

-30

-20

-10

0

10

20

30

100

150

200

250

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Volumes ('000 units) % YoY -RHS

558555

560

551

586 587

571

559

594

540

550

560

570

580

590

600

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Avg realisation (Rs '000)

22

.8

6.4

12

.2

4.7

(4.1

)

(14

.5)

(6.0

)

(34

.8)

-35

-25

-15

-5

5

15

25

80,000

100,000

120,000

140,000

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Revenue (Rs mn) % YoY - RHS

15

.1 15

.8

14

.5

13

.2 13

.5 1

4.0

14

.1 1

4.8

13

.6

13

14

15

16

10,000

12,000

14,000

16,000

18,000

20,000

22,000 4

QF

Y1

8

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

EBITDA (Rs mn) EBITDA Margin (%) - RHS

50,000

75,000

100,000

125,000

150,000

175,000

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Automotive Farm Equipment

4.1

17.6

3

6

9

12

15

18

21

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

Automotive Farm Equipment

Page | 4


M&M domestic SUV market share (%) In FY20, M&M has gained 100bps market share in the

tractor segment

Source: SIAM, Company, HSIE Research Source: TMA, Company, HSIE Research

Annual segmental performance: Automotive segment impacting group performance

Automotive EBIT (Rs mn) Farm equipment EBIT (Rs mn)


Revenue from operations FY17 FY18 FY19 FY20

Automotive

Standalone 320,197 321,085 353,529 284,086

Consolidated 537,720 527,928 591,729 486,417

Farm equipment

Standalone 139,019 160,936 168,747 154,025

Consolidated 190,435 219,884 224,033 211,132

EBIT FY17 FY18 FY19 FY20

Automotive

Standalone 14,128 21,481 20,275 12,637

Consolidated 21,385 20,262 21,080 (17,179)

Farm equipment

Standalone 25,617 31,454 32,651 29,262

Consolidated 26,090 30,511 23,816 19,350


(4,000)

-

4,000

8,000

12,000

16,000

20,000

24,000

FY

18

FY

19

FY

20

Standalone Consolidated

10,000

18,000

26,000

34,000

FY

18

FY

19

FY

20

Standalone Consolidated

19%

18%

20%

22%

24%

26%

Ap

r-18

May

-18

Jun

-18

Jul-

18A

ug

-18

Sep

-18

Oct

-18

No

v-1

8D

ec-1

8Ja

n-1

9F

eb-1

9M

ar-1

9A

pr-

19M

ay-1

9Ju

n-1

9Ju

l-19

Au

g-1

9Se

p-1

9O

ct-1

9N

ov

-19

Dec

-19

Jan

-20

Feb

-20

Mar

-20

SUV Domestic market share

41.2%

39%

40%

41%

42%

43%

44%

FY

16

FY

17

FY

18

FY

19

FY

20

M&M's domestic tractor market share

Page | 5


SsangYong Financials

Income statement

(Million KRW) 2018 2019 % YoY

Volumes (in units) 143,309 135,235 -6%

Revenue 3,704,794 3,623,882 -2%

Gross Profit 462,271 267,574 -42%

Operating Profit (Loss) (64,176) (281,905) 339%

Net Income (Loss) (61,798) (341,364) 452%


Balance sheet

(Million KRW) 2018 2019

Total Assets 2,205,642 2,019,207

Current Assets 571,070 497,540

Non-current Assets 1,634,571 1,521,667

Total Liabilities 1,512,354 1,616,084

Borrowings 253,228 412,856

Shareholder's Equity 693,288 403,124

Capital stock 689,747 749,200


Key Ratios

2018 2019

Borrowings / Equity 37 102

Net Income / Revenue -2 -9

Sales Growth (%) 6 -2


Volume assumptions

FY16 FY17 FY18 FY19 FY20 FY21E FY22E

SUV 227,915 232,589 240,560 245,855 189,755 165,087 184,897

% YoY 7% 2% 3% 2% -23% -13% 12%

Pick-up 149,701 156,497 172,643 196,458 164,229 141,622 157,544

% YoY 2% 5% 10% 14% -16% -14% 11%

Tractors 214,173 263,177 319,623 330,436 301,915 280,781 308,859

% YoY -8% 23% 21% 3% -9% -7% 10%

Others* 115,898 117,349 135,306 165,797 123,910 108,757 117,216

% YoY 9% 1% 15% 23% -25% -12% 8%

Total volumes 707,687 769,612 868,132 938,546 779,809 696,247 768,516

% YoY 1% 9% 13% 8% -17% -11% 10%

Avg realisation (Rs) 577,587 572,412 560,809 571,246 583,320 596,113 609,655

% YoY 5% -1% -2% 2% 2% 2% 2%

Source: Company, HSIE Research *Others include MHCVs, LCVs and cars

Page | 6


Valuation

Maintain ADD. We set a revised SOTP of Rs 520 based on Mar-22 EPS. We now

value the core business at 13x P/E (vs. 10x earlier) to reflect the (1) Improved

outlook for Agri segment (2) Increased focus on capital allocation.

Mar-22

Dividend on Investments (Rs mn) 7,635

Contribution to M&M EPS 6.4

M&M's EPS 34.4

Core EPS (pre dividend fron subs) 28.0

PE Multiple 13.0

Value 364

Value of Subsidiaries (at 25% discount to listed price) 156

Total 520

Subsidiaries (at 25% discount to listed price) Value/sh (Rs)

Tech Mahindra 88

MMFSL 33

Other listed subs 36

Value of listed subsidiaries 156

Peer set comparison

Mcap

(Rs bn)

CMP

(Rs/sh) Reco TP

Adj EPS (Rs/sh) P/E (x) RoE (%)

FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

Ashok Leyland 154 52 REDUCE 46 1.2 1.0 3.5 43.3 52.4 14.9 4.2 3.4 11.4

Bajaj Auto 806 2,784 ADD 2,850 176.2 149.4 167.6 15.8 18.6 16.6 22.9 18.2 18.8

Eicher 460 16,861 REDUCE 15,020 670.4 560.6 705.1 25.2 30.1 23.9 19.0 14.0 15.6

Escorts Ltd. 120 977 BUY 950 55.4 49.9 63.1 17.6 19.6 15.5 15.1 12.0 12.2

Hero Motocorp 480 2,401 BUY 2,650 155.0 128.7 155.5 15.5 18.7 15.4 22.9 17.3 19.2

M&M 632 508 ADD 520 29.8 25.8 34.4 17.1 19.7 14.8 10.1 8.4 10.5

Maruti Suzuki 1,678 5,555 BUY 5,810 187.1 146.0 252.4 29.7 38.0 22.0 11.7 8.5 13.6

Source: HSIE Research

Change in Estimates

Rs mn New Old Change (%)

FY21E FY22E FY21E FY22E FY21E FY22E

Net Sales 410,891 463,845 404,621 456,753 2 2

EBITDA 51,156 64,289 48,231 63,306 6 2

EBITDA margin (%) 12.5 13.9 11.9 13.9 53 bps 0 bps

Adj PAT 30,774 41,014 28,659 38,039 7 8

Adj EPS (in Rs) 25.8 34.4 24.1 31.9 7 8

Source: HSIE Research

Page | 7


Financials M&M+MVML Income Statement

(Rs mn) FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Net Revenues 388,566 413,779 475,774 528,482 448,655 410,891 463,845

Growth (%) 3.7 6.5 15.0 11.1 (15.1) (8.4) 12.9

Material Expenses 265,115 280,192 316,280 359,977 298,668 278,584 312,353

Employee Expenses 25,647 29,920 31,630 32,830 32,237 30,406 31,541

Other Operating Expenses 45,817 49,625 57,429 60,375 54,245 50,745 55,661

Total Expenses 336,579 359,737 405,339 453,182 385,150 359,735 399,556

EBITDA 51,988 54,042 70,434 75,301 63,506 51,156 64,289

EBITDA Margin (%) 13.4 13.1 14.8 14.2 14.2 12.5 13.9

EBITDA Growth (%) 10.9 4.0 30.3 6.9 (15.7) (19.4) 25.7

Depreciation 12,484 16,745 16,254 20,030 23,631 23,867 24,822

EBIT 39,504 37,297 54,181 55,271 39,875 27,289 39,467

Other Income (Including EO Items) 7,910 12,064 9,517 16,303 15,391 15,083 16,290

Interest 2,329 2,426 1,882 1,467 1,245 1,987 2,145

PBT & Exceptional items 45,084 46,935 61,816 70,106 54,021 40,386 53,612

Exceptional gain/(loss) 60 5,485 4,336 (227) (28,112) - -

PBT 45,144 52,420 66,152 69,879 25,910 40,386 53,612

Tax (Incl Deferred) 12,166 13,181 19,920 15,867 18,513 9,612 12,599

RPAT 32,978 39,239 46,232 54,012 7,397 30,774 41,014

APAT 32,919 33,754 41,896 54,239 35,509 30,774 41,014

APAT Growth (%) 3.7 2.5 24.1 29.5 (34.5) (13.3) 33.3

Adjusted EPS (Rs) 55.8 56.9 35.2 45.5 29.8 25.8 34.4

EPS Growth (%) 3.7 2.0 (38.1) 29.3 (34.5) (13.3) 33.3


M&M+MVML Balance Sheet

(Rs mn) FY16 FY17 FY18 FY19 FY20P FY21E FY22E

SOURCES OF FUNDS

Share Capital - Equity 2,952 2,968 5,950 5,958 5,958 5,958 5,958

Reserves 220,708 264,244 298,924 343,979 348,156 370,022 401,444

Total Shareholders Funds 223,659 267,212 304,874 349,937 354,114 375,980 407,402

Long Term Debt - 11,665 6,685 4,485 4,710 4,945 5,192

Short Term Debt 45,078 27,337 25,457 22,317 23,433 24,605 25,835

Total Debt 45,078 39,002 32,142 26,803 28,143 29,550 31,027

Net Deferred Taxes 12,719 1,764 4,557 7,896 8,686 9,555 10,510

TOTAL SOURCES OF FUNDS 281,457 307,978 341,573 384,636 390,943 415,085 448,939

APPLICATION OF FUNDS

Net Block 99,091 96,871 96,826 118,532 122,714 123,826 127,821

CWIP - 20,888 33,244 26,437 25,115 23,860 22,667

Investments 124,144 131,235 154,624 173,836 184,337 189,338 196,838

Total Non-current Assets 223,235 248,994 284,694 318,805 332,166 337,024 347,326

Cash & Equivalents 52,915 53,600 68,617 70,746 58,057 67,602 84,343

Inventories 31,733 32,285 33,271 47,631 41,793 37,149 40,666

Debtors 24,017 28,758 30,984 38,119 34,417 32,646 36,853

Other Current Assets 65,238 56,981 76,027 73,868 84,949 97,691 112,344

Total Current Assets 173,903 171,624 208,899 230,365 219,216 235,088 274,206

Creditors 63,655 75,537 93,737 103,607 93,419 83,304 91,498

Other Current Liabilities & Provns 52,026 37,104 58,283 60,928 67,021 73,723 81,095

Total Current Liabilities 115,681 112,640 152,019 164,535 160,439 157,027 172,593

Net Current Assets 58,222 58,984 56,879 65,831 58,776 78,061 101,613

TOTAL APPLICATION OF FUNDS 281,457 307,978 341,573 384,636 390,943 415,085 448,939


Page | 8


M&M+MVML Cash Flow (Rs mn) FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Reported PBT 45,144 52,420 66,152 69,879 25,910 40,386 53,612

Non-operating & EO Items (7,969) (17,549) (13,853) (16,076) 12,720 (15,083) (16,290)

Interest Expenses 2,329 2,426 1,882 1,467 1,245 1,987 2,145

Depreciation 12,484 16,745 16,254 20,030 23,631 23,867 24,822

Working Capital Change (2,830) (78) 17,122 (6,822) (5,635) (9,740) (6,811)

Tax Paid (11,010) (24,136) (17,127) (12,528) (17,723) (8,743) (11,643)

OPERATING CASH FLOW ( a ) 38,148 29,828 70,429 55,951 40,148 32,673 45,834

Capex (16,000) (35,413) (28,564) (34,930) (26,491) (23,723) (27,624)

Free Cash Flow (FCF) 22,148 (5,585) 41,865 21,021 13,657 8,949 18,210

Investments (12,000) (7,091) (23,389) (19,212) (10,501) (5,001) (7,500)

Non-operating Income 7,969 17,549 13,853 16,076 (12,720) 15,083 16,290

INVESTING CASH FLOW ( b ) (20,031) (24,955) (38,101) (38,066) (49,712) (13,641) (18,834)

Debt Issuance/(Repaid) 1,000 (6,077) (6,860) (5,340) 1,340 1,407 1,477

Interest Expenses (2,329) (2,426) (1,882) (1,467) (1,245) (1,987) (2,145)

FCFE 20,819 (14,087) 33,123 14,215 13,752 8,369 17,543

Share Capital Issuance (0) 13,188 1,693 2,699 - (0) -

Dividend (8,307) (8,875) (10,263) (11,648) (3,220) (8,907) (9,592)

FINANCING CASH FLOW ( c ) (9,636) (4,188) (17,312) (15,755) (3,125) (9,487) (10,260)

NET CASH FLOW (a+b+c) 8,481 685 15,017 2,130 (12,689) 9,545 16,741

Closing Cash & Equivalents 52,915 53,600 68,617 70,746 58,057 67,602 84,343

Key Ratios FY16 FY17 FY18 FY19 FY20P FY21E FY22E

PROFITABILITY (%)

GPM 31.8 32.3 33.5 31.9 33.4 32.2 32.7

EBITDA Margin 13.4 13.1 14.8 14.2 14.2 12.5 13.9

EBIT Margin 10.2 9.0 11.4 10.5 8.9 6.6 8.5

APAT Margin 8.5 8.2 8.8 10.3 7.9 7.5 8.8

RoE 15.6 13.8 14.6 16.6 10.1 8.4 10.5

RoIC (or Core RoCE) 13.1 11.1 13.9 14.6 8.1 6.1 8.5

RoCE 12.9 12.0 13.3 15.3 9.4 8.0 9.9

EFFICIENCY

Tax Rate (%) 27.0 28.1 32.2 22.6 34.3 23.8 23.5

Fixed Asset Turnover (x) 3.9 4.3 4.9 4.5 3.7 3.3 3.6

Inventory (days) 29.8 28.5 25.5 32.9 34.0 33.0 32.0

Debtors (days) 22.6 25.4 23.8 26.3 28.0 29.0 29.0

Other Current Assets (days) 61.3 50.3 58.3 51.0 69.1 86.8 88.4

Payables (days) 59.8 66.6 71.9 71.6 76.0 74.0 72.0

Other Current Liab & Provns (days) 48.9 32.7 44.7 42.1 54.5 65.5 63.8

Cash Conversion Cycle (days) 5.0 4.7 (9.0) (3.4) 0.6 9.3 13.6

Debt/EBITDA (x) (0.2) (0.3) (0.5) (0.6) (0.5) (0.7) (0.8)

Net D/E (x) (0.0) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)

Interest Coverage (x) 17.0 15.4 28.8 37.7 32.0 13.7 18.4

PER SHARE DATA (Rs)

EPS 55.8 56.9 35.2 45.5 29.8 25.8 34.4

CEPS 77.0 94.3 52.5 62.1 26.0 45.9 55.2

Dividend 12.0 13.0 7.5 8.5 2.4 6.5 7.0

Book Value 379 450 256 294 297 316 342

VALUATION

P/E (x) 9.1 8.9 14.4 11.2 17.1 19.7 14.8

P/BV (x) 1.3 1.1 2.0 1.7 1.7 1.6 1.5

EV/EBITDA (x) 5.6 5.3 8.1 7.5 9.1 11.1 8.6

EV/Revenues (x) 0.8 0.7 1.2 1.1 1.3 1.4 1.2

OCF/EV (%) 13.0 10.4 12.4 10.0 7.0 5.8 8.3

FCF/EV (%) 7.6 (1.9) 7.4 3.7 2.4 1.6 3.3

FCFE/Mkt Cap (%) 3.4 (2.3) 5.5 2.3 2.3 1.4 2.9

Dividend Yield (%) 2.4 2.6 1.5 1.7 0.5 1.3 1.4


Page | 9


Rating Criteria

BUY: >+15% return potential

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

SELL: >10% Downside return potential

Date CMP Reco Target

5-Dec-19 526 NEU 570

9-Jan-20 525 NEU 570

12-Feb-20 524 NEU 570

2-Mar-20 456 ADD 585

20-Apr-20 363 ADD 410

14-Jun-20 508 ADD 520

From 2nd March 2020, we have moved to new rating system

RECOMMENDATION HISTORY

200

300

400

500

600

700

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

Jan

-20

Feb

-20

Ma

r-2

0

Ap

r-2

0

Ma

y-2

0

Jun

-20

M&M TP

Page | 10


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14 june 2020 results review 4qfy20 mahindra & mahindra

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