Plants running at 100% capacity- M&MAniket Khanolkar
Update on the Indian Equity Market:
On Thursday Nifty closed -0.1% lower at 11,527. Among the sectoral indices Bank (-1.4%), PVT Bank (-1.4%), FIN Services (-1.0%) closed lower. IT (+1.50%), Pharma (+0.9%) and FMCG (+0.8%) closed higher. ICICI Bank (-2.1%), Bharti Airtel (-1.9%) and Axis Bank (-1.9%) closed on a Negative note. Infratel (+10.9%), GRASIM (+7.2%) and Titan (+5.9%) were among the top gainers.
Excerpts from an interview of Mr. Hemant Sikka, President Farm Equipment Sector, M&M with CNBC-TV18 dated 2nd September 2020:
• Tractor sales were up 65% YoY, M&M remains positive because of good harvest and bountiful monsoon.
• The production started from mid-May and now plants are running at 100% capacity.
• The demand is robust throughout the country. The kharif sowing is going well which gives a confidence to farmers.
• The domestic market grew by 69% in August 20.
• On Finance, the availability is better compare to 3-4 months back. Initially finance was an issue as offices were not open, it was difficult for people to reach offices.
• The improvement in financing is seen from middle of June. The collection is also good as farmers have a better cash flow.
• Mr. Sikka said that for the next 3 months the company is expecting a full blast of production.
• The stock is at historic low levels.
• The challenges on supply side had eased out. All suppliers have ramped up their production.
• A good festive season is expected as supply chains are coming back on track and all factories running.
Consensus Estimate: (Source: market screener and Investing.com websites)
• The closing price of M&M was ₹ 642/- as of 03-September-2020. It traded at 25x/ 18x/ 16x the consensus Earnings per share estimate of ₹ 26.1/35.7/41.1 for FY21E/ FY22E/ FY23E respectively.
• The consensus average target price for M&M is ₹ 585/- which implies a PE multiple of 14x on FY23E EPS of ₹41.1/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”
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