14 June 2020 Results Review 4QFY20 Mahindra & Mahindra
Transcript of 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
+91-22-6171-7316
Mansi Lall
+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)
Source: Company, HSIE Research
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
Source: Company, HSIE Research
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
Source: Company, HSIE Research
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
Mahindra & Mahindra : Results Review 4QFY20
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
Source: Company, HSIE Research Source: Company, HSIE Research
Segmental volumes (in units) Segmental EBIT margins (%)
Source: Company, HSIE Research Source: Company, HSIE Research
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
Mahindra & Mahindra : Results Review 4QFY20
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)
Source: Company, HSIE Research Source: Company, HSIE Research
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
Source: Company, HSIE Research
(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
Mahindra & Mahindra : Results Review 4QFY20
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%
Source: Company, HSIE Research
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
Source: Company, HSIE Research
Key Ratios
2018 2019
Borrowings / Equity 37 102
Net Income / Revenue -2 -9
Sales Growth (%) 6 -2
Source: Company, HSIE Research
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
Mahindra & Mahindra : Results Review 4QFY20
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
Mahindra & Mahindra : Results Review 4QFY20
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
Source: Company, HSIE Research
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
Source: Company, HSIE Research
Page | 8
Mahindra & Mahindra : Results Review 4QFY20
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
Source: Company, HSIE Research
Page | 9
Mahindra & Mahindra : Results Review 4QFY20
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
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M&M TP
Page | 10
Mahindra & Mahindra : Results Review 4QFY20
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