|
Summary
of Contents
|
STOCK UPDATE
Mahindra &
Mahindra
Cluster: Apple
Green
Recommendation: Buy
Price target: Rs870
Current
market price: Rs835
Buy-out urges unsated
Key points
-
Mahindra & Mahindra (M&M) has
been in the thick of action lately, announcing two
acquisitions and planning to enter the US markets. The
company appears to be well on its way to target sales of $1
billion for the Mahindra Systems and Technology group by
2010.
-
M&M has acquired DGP Hinoday by
buying out its existing shareholders—the DG Piramal group
and India Private Equity Fund, Mauritius. The residual stake
of 34% would continue to be with Hitachi Metals. DGP Hinoday
is a market leader in castings and ferrites with sales of
Rs243 crore.
-
Though the price at which these
acquisitions have been made have not been announced, we are
impressed by the overall strategy of the group and maintain
our positive stance on the stock.
-
M&M expects to maintain the strong
volume growth momentum in the automotive sector in H2 at
roughly the same pace as in the first half of the fiscal, ie
around 14-15%.
-
Using the sum-of-parts model, we have
valued M&M's core business at Rs607 (14x FY2008E
earnings) and its subsidiaries at Rs263. We maintain our Buy
recommendation on the stock with a price target of Rs870.
| |
