JP Morgan reiterates its 'Overweight' stance on M&M

MAHINDRA & MAHINDRA

RESEARCH: JP MORGAN

RATING: OVERWEIGHT

CMP: 705.8

Mahindra & Mahindra’s automotive sales were up 24% y-o-y in September ‘10, and growth was driven by the three wheeler (+41%) and light truck portfolio (+39% yoy). Passenger UV sales growth moderated to +8% y-o-y given a base effect and production constraints. The management highlighted that shortage of fuel injection equipment as well as the late festive season (Diwali is in November this year as compared to October last year) has led to the moderate growth.The management also highlighted that tractor sales were impacted by production shortage - given constraints on supplies of castings and demand was impacted by the floods in northern India. Over the last month, the stock price has outperformed the broader BSE Sensex and JP Morgan reiterates its `Overweight’ stance on M&M , given that the company will benefit from an expansion into newer product segments and sustained growth in its traditional segments.