Recommendation: Buy
CMP = Rs 641 (at the time of recommendation)
Price target: Rs 900
Key points:
- The Q4FY2008 results of Mahindra & Mahindra are a little lower than expectations due to higher than anticipated tax expenses. The net sales grew by 14.6% to Rs 3,148.2 crore, higher than expected growth mainly due to a stronger performance of both the business divisions, automotive and farm equipment.
- The operating profit margin declined by 50 basis points yoy and by 40 basis points sequentially to 10.9%, as the operating profit grew by 9.2% to Rs 342.4 crore.
- Looking at the segmentals, the automotive revenues grew by 16% to Rs 2,077.9 crore while the profit before interest and tax (PBIT) margin of this division remained almost flat yoy at 10%. The revenues of the farm equipment division grew by 9% while its margin improved by 270 basis points yoy and by 70 basis points sequentially to 14.5%.
- I remain bullish on M&M and recommend Buy option on this stock with a price target of Rs 641.
