Mahindra & Mahindra Limited

Mahindra & Mahindra Limited (M&M) is an Indian multinational automaker headquartered in Mumbai Maharashtra, India.

Company Information

• One of the largest automobile manufacturers by production in India
• Subsidiary of Mahindra Group conglomerate
• Founded in 1945 as a steel trading company in Ludhiana as Mahindra & Mohammed
• Founded by brothers K.C. Mahindra and J.C. Mahindra and Malik Ghulam Mohammed
• M&M is India’s premier utility vehicle (UV) company
• Company has made its presence felt internationally as one can very easily find its cars on the roads of Australia, Europe, Latin America, Malaysia, South Korea, and South Africa.

Some of the groundbreaking models under the company’s kitty are:

• XUV500
• Scorpio
• Bolero

Mahindra is known for cars, which offer pickups and is also known for reliable, rugged, environmental friendly commercial vehicles that are fuel-efficient.

Financial Information

• Total units sale of 483,246 units against 377,063 units last year thus marking an impressive growth of 28%
• Turnover of Rs 31,853.52 Crore for FY 2011-12, posting a growth of over 35%
• Net profit after tax was recorded at Rs. 2878.89 Crore.

Key Fundamentals

• Market Capital- Rs. 42200 Cr
• P/E Ratio- 14.67
• Book value- 197.18
• Dividend- 250%
• Industry PE- 16.46
• Earning/Share- 46.89
• Price/Book 3.49
• Div Yield- 1.82%
• Face Value- Rs. 5

Upcoming challenges

The company is currently facing the following challenges:

• Foreign layers entering the market are resulting in more competition as the products launched by such companies are attractively prices to achieve market share. With the competitively priced products, the monopoly of Mahindra & Mahindra in the Utility vehicle segment may be threatened.
• The proposal of Oil ministry imposing a special tax on the diesel cars is a threat to the company. Such kind of proposal if made to implement will result in increase costing for the cars which may get expensive by few Lakhs. M&M currently has most of its offerings in this market as Diesel cars and thus is likely to be one of the most hit companies by this tax, if levied.
• There is an ongoing issue over refunding of VAT with the Maharashtra State Government. The issue might force M&M to pull out fresh investments in tune of Rs 4000 Crore away from the state which will be a setback for the company and will be hindrance in its operation. Also, Mahindra & Mahindra may sell the undeveloped area of its recently developed Chakan Plant which again will be a drawback on the company’s repute and might negatively affect the company’s sales.

The company which is mainly operating in one of the largest emerging economies India, which is expected to grow at 7+% in the coming years, can foresee a bright future for itself. Also it is expected that the country will see a rise in the disposable income which will result in an increase in car sales and thus the company can benefit from such trend in the coming years. For FY13, the company has lined up 6-7 launches in the automotive space which includes:

• the sub 4,000mm Verito
• New electric car under Reva brand.

For the tractor segment the company has plans to launch 3-4 models.

Also if we look at the company’s recent P/E and share price we see investors’ confidence is well supported by the valuation. Thus it is expected that the company will show more percentage upside in the coming years and is definitely a buy for now. As far as the current price trend is considered company could see an upside of 5-7% from this level only to reach a level of 950. If all goes well regarding the launch it could be a good investment option for long term as well.