Mahindra and Mahindra Ltd
Raising target price to Rs1265, maintain ACCUMULATE
ACCUMULATE
CMP: Rs 1081 Target Price: Rs 1265
We are upgrading our volumes estimates for FY10 and FY11 across all the segments. The volume upgrades are due to strong performance in 3QFY10 vis a vis our estimates and expectation of a good rabi crop (till 16th November 2009, the acreage of wheat, rapeseed and mustard/gram dal have increased by 5%, 3% and 1% respectively over comparable period last year). In our note – 'Favorable risk reward ratio – dated 12th October 2009', we had indicated that our estimates are very conservative to factor in the risk of weak monsoon.
We have upgraded our standalone EPS by 16% and 12% to Rs 65.6 and Rs 69 for FY10 and FY11 respectively. Despite a strong volume upgrades and hence operating leverage, we are expecting FY11 EBIDTA margins to decline by 40 bps to 13.3% vis a vis our earlier estimates due to higher raw material cost pressures. We are upgrading our target price by 13% to Rs 1265 per share. We maintain our ACCUMULATE rating on the stock.
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