â??Mahindra and Mahindra (M&M) reported better than expected set of numbers, led by better product mix & improved realizations. Revenues for the quarter were aided by strong growth in volumes of Utility Vehicles & Pick-ups. EBITDA margin expanded by 190 bps on a sequential basis, led by cost control measures taken up by the Company, thereby boosting profitability. M&M reported net sales of INR 9367 mn, up by 39.3% YoY & almost flat on QoQ basis. Revenues for the quarter were aided by strong growth in volumes of Utility Vehicles (up 32% YoY) & Pick-ups (up 26.9% YoY) in Q1FY13 and also because of better product mix & improved realizations. The Company has taken a price increase of 1.5% in automotive segment & 3% in the tractor segment during April 2012 aiding realizations. Profits for the quarter at INR 7256 mn was up by 19.9% YoY & were down by 5.3% QoQ.

M&M reported volumes of 182149 units in Q1FY13, up by 14.4% YoY (down by 0.3% QoQ). This was led by strong growth in automotive volumes to 122571 units, up by 23.8% YoY & down by 6.1% QoQ. Performance in tractors segment was hit by lower demand in key areas like A.P & Punjab. Tractors volumes at 59578 units de-grew by 1.0% YoY (up by 14.2% QoQ). Average Selling Price (ASP) in automotive segment stood at INR 512246/unit, up by 31.5% YoY & 1.1% QoQ. ASP's in tractors segment stood at INR 516682/unit, up by 8.8% YoY & down by 2.4% QoQ. Margins in Q1FY13 expanded by 152 bps on a sequential basis (down by 147 bps YoY) to 11.84%, led by lower than expected other operating expenses which at 8.2% of sales were down by 130 bps QoQ (60 bps YoY). EBITDA margin of M&M+MVML stood at 13.91%, up by 191 bps QoQ (down by 39 bps YoY). This was also led by strong sustenance in EBIT margin in the Tractors segment, which at 15.67%, de-grew by 34 bps YoY & 5 bps QoQ.

The company has been able to outperform the automobile sector in Q1FY13 largely on the back of new launches, better product mix and strong demand in its UV's & pick-ups segment. With the ramp up of capacity at Chakan, strong demand for XUV5OO, new launcheslined-up in the coming months, we remain positive on the Company. We expect M&M's standalone revenues & profits to register a CAGR of 16.2% & 12.9% respectively over FY12-FY14E. Using SOTP valuation, we retain our "BUY" recommendation on the stock with a target of INR 862 over a period of 15 months,â?? says SPA Research report.

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