Mahindra & Mahindra Ltd. share price forecast

Mahindra & Mahindra’s (M&M) Q1FY23 EBITDA margin at 11.9% (up 57bps QoQ) was marginally below our estimate of 12.1%.

The recent binding agreement executed between M&M and British International Investments (BII) would result in total cash inflow of Rs38.5bn from both parties together into a new wholly-owned electric vehicle (EV) subsidiary (EV Co). With valuation of the EV Co being up to ~US$9bn, BII’s stake in it would be in the 2.75- 4.75% band (subject to business performance)

Mahindra (MM) launched the urban centric D segment SUV Scorpio-N with initial capacity of 6k units/month and attractive pricing (on-road price range of Rs1.6mn to Rs2.3mn for manual version) vs targeted peers like Toyota Innova Crysta, Tata Safari and MG Hector. Amidst current success in UVs led by XUV7oo/Thar, we expect this model to drive UV volume for MM to above 30kunits/month from H2FY23.

Oil India: Our BUY recommendation on Oil India with a target price of INR 300 is premised on (1) increase in crude price realisation and (2) improvement in domestic gas price realisation. Oil price realisation for FY22 improved to USD 76.7/bbl, vs USD 43/bbl in FY21, given the expected global economic rebound, post COVID. Q4FY22 revenue was 2% below our estimate, while EBITDA was 1% higher than the estimate, owing to lower-than-expected employee expenses and lower other expenses. RPAT came in 29% above the estimate, given lower depreciation, higher other income, and lower tax rate of 20%. Crompton Consumer: Crompton's Q4FY22 revenue was a miss but the EBITDA margin was in line. Similar to peers, the company too was impacted by Omicron in Jan and slow channel filling. Feb/March saw double-digit growth along with healthy secondary growth. Revenue growth, at 2% YoY (HSIE 8%, 9% three-year CAGR), was also impacted by pumps (industry-level issue). ECD clocked in 3% growth (ex-pump 7%, FY22 15%), with a healthy three-year CAGR of 12.5%. Fan growth was at 9% YoY (32% three-year CAGR, 19% in FY22), resulting in a 3% share gain to exit share of 29%. Lighting revenue was down by 4%, with continuous impact of B-B and B-G conventional lighting. Crompton remained one of the best among peers in cost control, and hence, despite several headwinds, EBITDA margin came in flat YoY/QoQ at 15% (a slight beat). We remained confident of healthy growth for fans, appliances and B-C lighting. However, a part of the portfolio (pump, B-B/B-G lighting)...

Escorts Ltd; Mahindra and Mahindra Ltd; Balkrishna Industries Ltd.

M&M; posted a decent operating performance amidst challenging RM scenario. 2QFY22 EBITDA margin came below our estimates and impacted raw material inflation as well as weak mix. Despite sharp price hikes taken by the company, tractor segment's EBIT margin came in at 18.7% (-570/-160bps YoY/qoq) while automotive segment was at 2.7% (-380/+100bps YoY/Qoq). However, new product launches in automotive segment are seeing good traction with ~70k+ bookings for XUV700 and overall orderbook of ~160k units. Management mentioned that due to erratic monsoons, price hikes and...