3QFY2013 Result Update | Automobile

February 8, 2013

Mahindra and Mahindra

Performance Highlights
Y/E March (` cr) Net Sales EBITDA EBITDA Margin (%) Adj. PAT 3QFY13 10,774 1,211 11.2 836 3QFY12 8,383 1,023 12.2 662 % chg (yoy) 28.5 18.4 (96)bp 26.3 2QFY13 9,813 1,119 11.4 902 % chg (qoq) 9.8 8.3 (16)bp (7.3)

BUY
CMP Target Price Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Automobile 54,202 1,423 0.8 875/622 126,643 5 19,485 5,904 MAHM.BO MM@IN

`883 `1,019 12 Months

Source: Company, Angel Research

Mahindra and Mahindra (MM) reported a slightly lower-than-expected bottom-line performance for 3QFY2013, primarily due to the contraction in EBITDA margin, led by sequential decline in net average realization. The overall performance was driven by the continued volume traction in the automotive segment (AS) backed by the new launches. We broadly retain our top-line and EBITDA margin estimates for FY2013/14. However our earnings estimates are revised slightly upwards to factor in the lower tax-rate going ahead as guided by the Management. We expect AS to drive the total volume growth of the company led by the success of new launches (XUV5OO, Quanto and Rexton) in the utility vehicle (UV) segment. We expect tractor volumes to recover in FY2014 and clock a growth rate of 8% after posting a decline of 4% in FY2013. We retain our positive bias on MM and recommend a Buy rating on the stock. 3QFY2013 performance driven by AS: MMs top-line registered a strong growth of 28.5% yoy (9.8% qoq) to `10,774cr; however it was lower than our expectations of `11,070cr, largely due to the sequential decline in net average realization in the AS (1% qoq) and farm equipment segment (FES, 1.3% qoq). The top-line growth on a yoy basis was driven by a robust volume (17.5% yoy) and net average realization growth in the AS (22.5% yoy). Total volumes, however, posted a growth of 10.9% yoy (10.8% qoq) as tractor sales witnessed a decline of 1.6% yoy on account of weak domestic demand. The EBITDA margin contracted 96bp yoy (16bp qoq) to 11.2% owing to raw-material cost pressures, which as a percentage of sales increased 153bp yoy (97bp qoq) to 75.9%. As a result, the bottom-line came in at `836cr, a growth of 26.3% yoy; however it was down 7.3% qoq largely due to absence of dividend income from the subsidiaries. The bottom-line benefitted from the reduced tax rate on account of higher R&D spends. Outlook and valuation: At `883, MM is trading at 13.7x FY2014E earnings. We retain our positive bias on MM and recommend a Buy rating on the stock. Our sum of the parts (SOTP) target price works out to `1,019, wherein the companys core business fetches `739/share and the value of its investments works out to `280/share.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 25.3 24.6 42.1 8.0

Abs. (%) Sensex MM

3m 3.4 (3.3)

1yr 10.0 28.5

3yr 22.3 76.3

Key financials (Standalone)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 23,460 27.8 2,550 25.7 14.7 43.4 20.3 5.0 28.1 24.8 1.7 12.9

FY2012 31,854 35.8 2,753 8.0 11.8 46.7 18.9 4.3 24.6 21.2 1.3 11.8

FY2013E 40,060 25.8 3,255 18.2 11.5 55.3 16.0 3.6 24.5 22.0 1.0 9.3

FY2014E 46,301 15.6 3,787 16.3 11.7 64.3 13.7 3.0 23.8 22.3 0.8 7.5

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Please refer to important disclosures at the end of this report

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 1: Quarterly financial performance (Standalone)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchases of TG (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT Adj PAT Adj. PATM Equity capital (cr) Adjusted EPS (`)
Source: Company, Angel Research

3QFY13 10,774 5,722 53.1 498 4.6 2,457 22.8 886 8.2 9,563 1,211 11.2 47 179 74 1,060 1,060 9.8 224 21.1 836 836 7.8 295.0 14.2

3QFY12 8,383 4,659 55.6 447 5.3 1,577 18.8 677 8.1 7,360 1,023 12.2 35 141 67 914 914 10.9 252 27.6 662 662 7.9 294.2 11.3

% chg (yoy) 28.5 22.8 11.4 55.8 30.8 29.9 18.4 34 27.1 11.3 16.0 16.0 (11.2) 26.3 26.3

2QFY13 9,813 4,817 49.1 474 4.8 2,538 25.9 865 8.8 8,694 1,119 11.4 47 178 323 1,216 1,216 12.4 314 25.8 902 902 9.2 295.0

% chg (qoq) 9.8 18.8 5.0 (3.2) 2.4 10.0 8.3 (2) 0.3 (77.0) (12.8) (12.8) (28.8) (7.3) (7.3) (15.5) (7.3)

9MFY13 29,955 15,303 51.1 1,424 4.8 7,266 24.3 2,522 8.4 26,515 3,440 11.5 140 512 457 3,244 3,244 10.8 781 24 2,464 2,464 8.2 295.0 41.8

9MFY12 22,466 13,215 58.8 1,272 5.7 3,195 14.2 1,982 8.8 19,665 2,801 12.5 92 376 370 2,703 2,703 12.0 699 26 2,004 2,004 8.9 294.2 34.1

% chg (yoy) 33.3 15.8 11.9 127 27.2 34.8 22.8 53 36.1 23.5 20.0 20.0 11.7 22.9 22.9

26.0

15.3

22.6

Exhibit 2: 3QFY2013 Actual vs Angel estimates

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 10,774 1,211 11.2 836

Estimates 11,070 1,339 12.1 876

Variation (%) (2.7) (9.6) (86)bp (4.5)

February 8, 2013

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 3: Quarterly volume performance

Volume (units) Total volumes Auto Sales - Domestic Auto Sales - Exports Total Auto Sales Tractor Sales - Domestic Tractor Sales - Exports Total Tractor Sales
Source: Company, Angel Research

3QFY13 211,678 140,378 6,500 146,878 62,341 2,459 64,800

3QFY12 190,838 117,402 7,587 124,989 62,009 3,840 65,849

% chg (yoy) 10.9 19.6 (14.3) 17.5 0.5 (36.0) (1.6)

2QFY13 191,077 130,888 10,349 141,237 46,797 3,043 49,840

% chg (qoq) 10.8 7.3 (37.2) 4.0 33.2 (19.2) 30.0

9MFY13 588,362 389,454 24,690 414,144 165,699 8,519 174,218

9MFY12 531,809 327,897 20,543 348,440 173,519 9,850 183,369

% chg (yoy) 10.6 18.8 20.2 18.9 (4.5) (13.5) (5.0)

Slightly lower-than-expected growth in the top-line: MM posted a strong top-line growth of 28.5% yoy (9.8% qoq) to `10,774cr; however it was lower than our expectations of `11,070cr largely due to the sequential decline in net average realization in the AS (1% qoq) and FES (1.3% qoq). The top-line growth on a yoy basis was driven by a robust volume (17.5% yoy) and net average realization growth in the AS (22.5% yoy). Total volumes, however, posted a growth of 10.9% yoy (10.8% qoq) as tractor sales witnessed a decline of 1.6% yoy on account of weak domestic demand. While the AS registered an impressive revenue growth 43.9% yoy (2.9% qoq); the FES posted a sluggish revenue growth of 4.8% yoy.

Exhibit 4: Volume growth led by automotive segment

(units) 250,000 200,000 150,000 100,000
14.5 32.5 153,833 167,006 162,149 22.2 22.6 190,838 186,881 185,607 191,077 178,822 29.9 24.1

Exhibit 5: Net average realization down sequentially

(`) 600,000 500,000 400,000 300,000 200,000 100,000 0
2.3 2.8 5.5 5.0 9.9 5.7 394,874 397,222 408,764 405,112 433,791 24.5 21.9 24.8

Total volume

yoy growth (RHS)

211,678

(%) 35.0 30.0 25.0 20.0 15.0

Net average realisation

yoy growth (RHS)

494,501 498,254 505,513

(%) 30.0

458,302

25.0 20.0 15.0 10.0 5.0 0.0

50,000 0

11.9 6.9

10.9

10.0 5.0 0.0

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

Source: Company, Angel Research

3QFY13

Source: Company, Angel Research

February 8, 2013

3QFY13

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 6: Segmental performance

Y/E March (` cr) Total Net Sales Auto segment Farm segment Other segments Total PBIT Auto segment Farm segment Other segments PBIT/ Sales (%) Auto segment Farm segment Other segments
Source: Company, Angel Research

3QFY13 10,779 7,361 3,404 14 1,154 625 527 1.2 10.7 8.5 15.5 8.5

3QFY12 8,389 5,115 3,249 25 930 418 508 3.6 11.1 8.2 15.7 14.5

% chg (yoy) 28.5 43.9 4.8 (42.0) 24.1 49.6 3.7 (65.9) (38)bp 33bp (16)bp

2QFY13 9,818 7,150 2,653 15 1,067 672 392 3.4 10.9 9.4 14.8 22.3

% chg (qoq) 9.8 2.9 28.3 (4.6) 8.1 (6.9) 34.5 (63.4) (16)bp (90)bp 72bp

9MFY13 29,971 20,789 9,136 46 3,260 1,850 1,402 8.6 10.9 8.9 15.3 18.4

9MFY12 22,493 13,490 8,933 70 2,686 1,280 1,398 7.8 11.9 9.5 15.7 11.1

% chg (yoy) 33.2 54.1 2.3 (33.6) 21.4 44.5 0.2 10.3 (106)bp (59)bp (31)bp

EBITDA margin remains under pressure, down to 11.2%: On the operating front, the EBITDA margin contracted 96bp yoy (16bp qoq) to 11.2% largely due to raw-material cost pressures. As a result, the total raw-material cost as a percentage of sales increased 153bp yoy (97bp qoq) to 75.9%. However, the employee expenditure as a percentage of sales declined by 70bp yoy which arrested further contraction in margins. The EBIT margin in the AS expanded marginally by 33bp, however the FES witnessed a decline of 16bp yoy. Led by a strong volume growth in the AS, the automotive EBIT registered an impressive growth of 49.6% yoy.

Exhibit 7: EBITDA margins at 11.2%

(%) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 69.7 EBITDA margin 72.2 72.9 73.7 75.3 Raw material cost/sales 76.7 76.1 76.1 76.9

Exhibit 8: Bottom-line slightly lower than estimates

(` cr) 1,000 900 800 700 600 500 400 300 200 100 0 10.1 9.0 9.0 Net profit 10.0 7.9 8.6 7.7 Net profit margin (RHS) 9.2 7.8 (%) 12.0 10.0 8.0 6.0 4.0 2.0
617 607 605 737 662 806 726 902 836

15.1

12.9

13.3

12.0

12.2

10.3

11.8

11.4

11.2

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

0.0

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Bottom-line slightly below our estimates: MMs net profit for 3QFY2013 was 4.5% below our estimate at `836cr, a growth of 26.3% yoy; however it was down 7.3% qoq largely due to absence of dividend income from the subsidiaries. The bottom-line benefitted from the reduced tax rate on account of higher R&D spends.

February 8, 2013

3QFY13

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 9: Quarterly financial performance (MM + MVML)

Y/E March (` cr) Net sales Total expenditure Material cost % of net sales Employee expense % of net sales Other expenses % of net sales Operating profit OPM (%) Depreciation EBIT Interest Other income PBT Exceptional items PBT after Exceptional item Tax expense % of PBT Reported PAT Adj. PAT
Source: Company, Angel Research

3QFY13 10,243 8,863 7,375 72.0 532 5.2 956 9.3 1,380 13.5 205 1,174 72 76 1,177 1,177 262 22.3 915 915

3QFY12 8,212 7,080 5,903 71.9 473 5.8 704 8.6 1,132 13.8 164 968 64 69 972 972 266 27.4 706 706

% chg (yoy) 24.7 25.2 24.9 12 12.5 (57) 35.9 77 21.9 (32) 24.9 21.3 12.6 10.6 21.2 21.2 (1.3) 29.6 29.6

2QFY13 9,253 7,973 6,571 71.0 507 5.5 895 9.7 1,280 13.8 204 1,075 74 326 1,327 1,327 349 26.3 978 978

% chg (qoq) 10.7 11.2 12.2 99 4.9 (29) 6.8 (34) 7.8 (36) 0.5 9.2 (2.2) (76.8) (11.3) (11.3) (24.8) (6.5) (6.5)

9MFY13 28,374 24,479 20,295 71.5 1,520 5.4 2,665 9.4 3,894 13.7 590 3,304 218 468 3,554 3,554 883 24.8 2,672 2,672

9MFY12 22,262 19,204 15,809 71.0 1,340 6.0 2,055 9.2 3,058 13.7 443 2,615 177 372 2,810 2,810 724 25.8 2,086 2,086

% chg (yoy) 27.5 27.5 28.4 51 13.5 (66) 29.7 16 27.3 (1) 33.0 26.4 22.9 25.8 26.5 26.5 22.0 28.1 28.1

Strong MM + MVML performance: For 3QFY2013, the net revenues for MM + Mahindra Vehicle Manufacturers Ltd (MVML) posted a strong growth of 24.7% yoy (10.7% qoq) to `10,243cr. The strong performance was led by a 10.9% yoy (10.8% qoq) growth in volumes and 12.5% yoy (flat qoq) increase in net average realization. The net average realization improved led by a superior product-mix and price hikes in the AS and FES. The AS continued its strong revenue performance witnessing a growth of 37.8% yoy, led by strong volume traction in the UV portfolio. The EBITDA margin contracted marginally by 32bp yoy (36 qoq) to 13.5% primarily due to raw-material cost pressures. The AS EBIT margins improved 100bp yoy to 11.1% benefitting from the price hikes and superior product-mix and operating leverage benefits. The EBIT margins in the FES remained stable on a yoy basis despite the poor performance on the volume front. Nonetheless, the net profit surged 29.6% yoy to `915cr largely due to strong operating performance. The lower tax rate also benefited the bottom-line to some extent. Sequentially, the bottom-line declined 6.5% mainly due to lower other income (absence of dividend income from the subsidiaries).

February 8, 2013

Mahindra and Mahindra | 3QFY2013 Result Update

Conference call Key highlights

According to the Management, the demand for tractors remains subdued. The poor winter monsoon has affected demand in Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra and Gujarat which are also the key states for the company. The companys market share in the tractor segment has declined by ~1% to 41.5% as of YTD FY2013. The Management remains cautious of recovery in tractor demand and expects the industry to grow at a rate of 4-5% in FY2014. However, good Rabi crop and pent up demand in the Sothern markets (down since the last two years) can lead to higher growth in FY2014. MM is planning to launch a new tractor and 3-4 refreshes in FY2014. The tractor inventory remains at ~3 weeks at the plant and ~5 weeks at the dealers end. The new Zaheerabad plant is expected to start production by the end of FY2013. The new plant has an installed capacity of 50,000 tractors (can be expanded to 100,000 units) and has been set-up with a capex of `400cr. In the AS, the company has hiked prices across the products by 13% from January 2013. The company expects the UV segment to continue to do well. MM currently has a waiting period of one and two months for Quanto and Rexton respectively. The Management stated that the capacity for XUV5OO will be maintained at 4,500units/month. The inventory in the AS remains ~2 weeks at plants and ~3 weeks at the dealers end. According to the Management, the pricing power of the company remains strong, led by strong demand for new launches. The Reva electric car and a sub four-meter Verito are expected to be launched over the next two months. The company does not intend to launch any major product in the UV segment in the next twelve months. However, it would be launching 3-4 refreshes in the UV segment. The Management stated that Ssangyong posted a marginal growth in CY2012. However, its market share improved ~150bp in CY2012. The company (Ssangyong) is expected to clock volumes of ~149,000 units in CY2013. For FY2013, MM expects the effective tax rate to be at 24.3% largely due to higher spends towards R&D. Exports in the AS and FES segments have been severely impacted due to the slowdown in the major markets of Sri Lanka and Bangladesh. On budget expectations, the Management stated that the recent announcement of diesel deregulation is positive for the company as this mitigates the possibility of an additional tax on diesel vehicles.

February 8, 2013

Mahindra and Mahindra | 3QFY2013 Result Update

Investment arguments
Strong growth in AS to offset slowdown in FES: The outlook for tractor sales appears to be challenging given that the industry has witnessed a slowdown in demand over the past six months. As a result, the Management has lowered its volume guidance. However, MMs automotive volume growth continues to surprise positively, with an 18.9% yoy growth in 9MFY2013. Further, a positive response to the recently launched XUV500, Quanto and Rexton should sustain automotive sales going ahead and somewhat offset weak tractor demand. We expect AS to register a volume CAGR of 15.1% over FY2012-14 leading to an overall volume CAGR of 11% over the same period. New ventures firming up well: MMs new ventures in the commercial vehicle (CV) space are firming up well. New product launches such as the Gio and the Maxximo have received a good response. Further, launch of new products in the medium and heavy commercial vehicle (MHCV) space has positioned the company in line with other major domestic CV players such as Ashok Leyland and Tata Motors. This is expected to substantially augment the companys overall volume growth, supported by its well-known brand equity and extensive sales network. Investments constitute ~65% of the balance sheet: MM also has majority stakes in various listed companies in other sectors, including technology, property and finance. The high-growth potential of MM's subsidiaries is expected to unlock the actual value of the stock over the years. Listing of its subsidiaries has been supporting the companys valuation in the recent past and may continue to do so in the long term as well.

Outlook and valuation

We broadly retain our top-line and EBITDA margin estimates for FY2013/14. However our earnings estimates are revised slightly upwards to factor in the lower tax-rate going ahead as guided by the Management. We expect AS to drive the total volume growth of the company led by the success of the new launches (XUV5OO, Quanto and Rexton) in the utility vehicle (UV) segment. We expect tractor volumes to recover in FY2014 and clock a growth rate of 8% after posting a decline of 4% in FY2013.

Exhibit 10: Change in estimates

Y/E March Net Sales (` cr) OPM (%) EPS (`) Earlier Estimates FY2013E 40,035 11.5 54.4 FY2014E 46,272 11.6 62.1 Revised Estimates FY2013E 40,060 11.5 55.3 FY2014E 46,301 11.7 64.3 % chg FY2013E 0.1 (0)bp 1.6 FY2014E 0.1 10bp 3.5

Source: Company, Angel Research

At `883, MM is trading at 13.7x FY2014E earnings. We retain our positive bias on MM and recommend a Buy rating on the stock. Our sum of the parts (SOTP) target price works out to `1,019, wherein the companys core business fetches `739/share and the value of its investments works out to `280/share.

February 8, 2013

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 11: SOTP valuation

Key Subsidiary Mahindra Financial Services Mahindra Lifespace Developers Tech Mahindra Mahindra Forgings Mahindra Holidays and Resorts Mahindra Ugine Steel Other Investments (at book value) Total value (` cr) Per share value of investments (30% discount) MM's Core Business/share value (11.5x FY14E EPS) MM's Target Price with investments (`)
Source: Company, Angel Research

No. of Shares (cr) 5.8 2.1 6.1 4.9 7.0 1.6

CMP (`) 1,026 409 1,002 43 295 62

Value (` cr) 5,973 851 6,070 208 2,062 102 8,306 23,572 280 739 1,019

Exhibit 12: Key assumptions

Y/E March (units) Passenger Utility Vehicles (UV) 4-wheeler pick-up LCV Logan Three wheelers Exports Total Automotive Sales Domestic Tractor Sales Exports Tractor Sales Total Tractor Sales Total Volume
Source: Company, Angel Research

FY2009 214,128 9,792 5,332 57,424 10,815 297,491 165,581 8,999 174,580 472,071

FY2010 150,726 76,387 9,829 5,332 44,439 11,567 298,280 165,633 9,001 174,634 472,914

FY2011 169,205 105,588 11,077 10,009 62,142 19,042 377,063 201,785 11,868 213,653 590,716

FY2012 202,276 152,691 13,823 17,839 67,440 29,177 483,246 221,730 13,722 235,452 718,698

FY2013E 262,959 172,541 12,026 16,769 65,417 32,678 562,389 213,969 12,350 226,319 788,709

FY2014E 305,032 194,971 12,988 19,284 68,688 39,214 640,177 231,087 13,338 244,425 884,602

Exhibit 13: Angel vs consensus forecast

Angel estimates FY13E Total op. income (` cr) EPS (`) 40,060 55.3 FY14E 46,301 64.3 Consensus FY13E 39,415 53.1 FY14E 45,953 60.8 Variation (%) FY13E 1.6 4.1 FY14E 0.8 5.7

Source: Bloomberg, Angel Research

February 8, 2013

Mahindra and Mahindra | 3QFY2013 Result Update

Exhibit 14: One-year forward P/E chart

(x) 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Absolute P/E Five-yr average P/E

Exhibit 15: Premium/Discount to Sensex P/E

(%) 60.0 40.0 20.0 0.0 (20.0) (40.0) (60.0) (80.0) Absolute premium Five-yr average premium

Feb-03

Sep-07

May-10

Dec-04

Nov-05

May-10

Dec-04

Nov-05

Source: Company, Angel Research

Mar-12

Source: Company, Angel Research

Exhibit 16: Automobile - Recommendation summary

Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki Mahindra & Mahindra Tata Motors TVS Motor Reco. Buy Neutral Accumulate Neutral Buy Buy Buy CMP Tgt. price (`) (`) 24 2,044 1,724 1,588 883 286 40 28 1,923 1,019 337 47 Upside (%) 20.1 11.6 15.5 18.0 18.5 P/E (x) FY13E 16.0 19.0 16.3 24.7 16.0 8.0 9.4 FY14E 10.7 16.2 14.3 16.6 13.7 6.7 7.6 EV/EBITDA (x) FY13E 6.4 13.3 8.2 12.0 9.3 4.1 3.5 FY14E 5.2 10.8 6.7 8.0 7.5 3.6 2.7 RoE (%) FY13E 9.3 45.8 44.3 11.6 24.5 30.2 16.4 FY14E 13.3 42.8 40.9 15.3 23.8 27.6 18.0 FY12-14E EPS CAGR (%) 2.7 8.9 5.3 37.5 17.3 12.3 0.4

Source: Company, Angel Research

Company background
Mahindra and Mahindra, the flagship company of the Mahindra Group, is the largest manufacturer of UVs and tractors in India with an ~52% and ~42% market share in these segments, respectively. The company is also the second largest player in the light commercial vehicle (LCV) space, with an ~33% market share. MM is also the only company in India that is present across all the automotive segments. MM has an installed capacity of 6lakh and 2.3lakh units/year in the automotive and farm equipment segments respectively. In FY2011, MM acquired a 70% stake in Ssangyong Motor Co (SYMC), transforming itself into a global UV player. Apart from the core auto business, the company has subsidiaries/associates in various businesses such as IT, NBFC, auto ancillaries, hospitality and infrastructure.

February 8, 2013

Mar-12

Feb-03

Sep-07

Feb-13

Apr-02

Jan-04

Jun-09

Oct-06

Apr-11

Feb-13

Jul-08

Apr-02

Jan-04

Jun-09

Oct-06

Apr-11

Jul-08

Mahindra and Mahindra | 3QFY2013 Result Update

Profit and loss statement (Standalone)

Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income Recurring PBT % chg Extraordinary income/ (exp.) PBT Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2009 12,927 14.6 12,035 9,274 311 1,018 1,431 892 (18.5) 6.9 292 600 (29.8) 4.6 134 601 1,067 (24.1) (81) 986 200 20.3 868 786 (17.0) 6.1 15.9 14.4 (27.2) FY2010 FY2011 FY2012 18,363 42.1 15,647 12,346 379 1,190 1,732 2,716 204.5 14.8 371 2,345 290.6 12.8 157 658 2,847 166.7 (59) 2,788 759 27.2 2,088 2,029 158.1 11.0 36.9 35.9 148.7 23,460 27.8 20,006 16,264 444 1,432 1,866 3,454 27.2 14.7 414 3,040 29.6 13.0 72 552 3,520 23.6 (113) 3,407 858 25.2 2,662 2,550 25.7 10.9 45.3 43.4 21.1 31,854 35.8 28,083 23,500 553 1,702 2,328 3,771 9.2 11.8 576 3,195 5.1 10.0 163 574 3,606 2.5 (126) 3,480 727 20.9 2,879 2,753 8.0 8.6 48.9 46.7 7.7 FY2013E FY2014E 40,060 25.8 35,453 29,745 701 2,143 2,864 4,607 22.2 11.5 698 3,909 22.4 9.8 188 580 4,300 19.3 4,300 1,045 24.3 3,255 3,255 18.2 8.1 55.3 55.3 18.2 46,301 15.6 40,907 34,309 833 2,500 3,264 5,394 17.1 11.7 781 4,613 18.0 10.0 202 591 5,003 16.3 5,003 1,216 24.3 3,787 3,787 16.3 8.2 64.3 64.3 16.3

February 8, 2013

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Mahindra and Mahindra | 3QFY2013 Result Update

Balance sheet statement (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Investments Long term loans and advances Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Misc. exp. not written off Total Assets 4,894 2,326 2,568 647 5,786 5,081 1,574 1,402 2,104 4,798 283 13 5,276 2,538 2,739 964 6,398 6,047 1,743 1,856 2,447 5,200 5,971 2,838 3,133 774 1,868 117 4,722 615 1,153 2,955 5,942 7,838 3,552 4,286 795 1,477 36 6,941 1,188 1,406 4,347 7,360 (419) 9,129 4,251 4,878 1,004 11,451 1,477 36 8,151 1,349 1,803 5,000 7,912 239 19,085 10,480 5,031 5,449 1,153 13,329 1,477 36 9,654 1,713 2,084 5,857 8,882 772 22,216 273 4,989 5,262 4,053 (18) 283 294 295 295 14,159 14,454 3,424 527 197 483 19,085 295 17,040 17,335 3,674 527 197 483 22,216 7,544 10,020 11,810 7,827 10,313 12,105 2,880 240 2,321 354 187 421 3,174 527 197 483 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

9,297 10,947 13,598 16,486

8,926 10,310

847 (1,220)

9,297 10,947 13,598 16,486

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Mahindra and Mahindra | 3QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 986 292 834 320 (601) (200) 1,631 (1,338) (1,571) 601 (2,308) 1 1,466 321 (398) 1,390 713 861 1,574 2,788 371 (394) 990 (658) (759) 2,337 (700) (612) 658 (653) 719 (1,173) 312 (1,373) (1,515) 169 1,574 1,743 3,407 414 938 (370) (552) (858) 2,980 (505) (2,528) 552 (2,480) 1,006 (559) 624 (2,698) (1,628) (1,129) 1,743 615 3,480 576 (228) 207 (574) (727) 2,735 (1,888) (1,385) 574 (2,699) 24 853 803 (1,142) 538 574 615 1,188 4,300 698 (569) (580) (1,045) 2,804 (1,500) (1,141) 580 (2,060) 250 833 (583) 160 1,188 1,349 5,003 781 (241) (591) (1,216) 3,735 (1,500) (1,878) 591 (2,787) 250 833 (583) 365 1,349 1,713

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Mahindra and Mahindra | 3QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) (0.6) (3.7) 4.5 (0.7) (1.9) 15.0 (0.7) (2.1) 41.9 (0.7) (2.2) 19.6 (0.6) (2.0) 20.8 (0.7) (2.1) 22.8 3.0 30 29 82 (25) 3.6 22 23 69 (22) 4.2 22 20 63 (21) 4.6 23 19 61 (20) 4.7 24 19 60 (12) 4.7 25 19 59 (8) 7.4 6.3 16.4 23.2 18.7 31.0 24.8 17.7 28.1 21.2 16.7 24.6 22.0 16.7 24.5 22.3 17.0 23.8 4.6 0.8 1.9 6.9 3.2 (0.6) 4.9 12.8 0.7 2.2 20.2 3.3 (0.5) 10.9 13.0 0.7 2.1 20.5 2.1 (0.6) 9.4 10.0 0.8 2.3 17.9 4.7 (0.6) 9.4 9.8 0.8 2.4 17.9 4.3 (0.6) 9.6 10.0 0.8 2.4 18.3 4.3 (0.6) 9.9 15.9 14.4 21.3 5.1 96.3 36.9 35.9 42.4 9.7 138.1 45.3 43.4 50.5 12.0 175.4 48.9 46.7 56.5 13.0 205.3 55.3 55.3 67.1 12.5 245.2 64.3 64.3 77.5 12.5 294.1 61.2 41.5 9.2 0.6 3.3 54.4 5.2 24.6 20.8 6.4 1.1 2.3 17.2 4.3 20.3 17.5 5.0 1.4 1.7 12.9 3.3 18.9 15.6 4.3 1.5 1.3 11.8 2.7 16.0 13.2 3.6 1.4 1.0 9.3 2.2 13.7 11.4 3.0 1.4 0.8 7.5 1.8 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

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Mahindra and Mahindra | 3QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Mahindra and Mahindra No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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