Broker's Call: Motilal maintains buy on M&M

Motilal Oswal has maintained its buy rating on Mahindra & Mahindra with a target price of Rs 1,225. M&M’s 3QFY13 results were below estimates, impacted by 100 bps QoQ decline in Auto PBIT margins, while tractor margins improved by 70bps QoQ on price hikes, better product mix and benign RM cost pressures. Net sales grew 28.6 per cent YoY (+10.2 per cent QoQ) to Rs 10,640 crore. M&M does not expect discounting pressure to increase over near term either on auto or tractor division.

For FY14, the tractor industry is likely to grow by 4-6 per cent on normal monsoon. Driven by new launches, UV industry will grow by 15-17 per cent. There are no major launches in the auto division over next 12-18 months. However, M&M is working on three brand new products, expected to be launched from FY15-end.

While over short term, there are no visible catalyst, we remain positive on M&M over medium to long term.