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Dolat Capital Report
M&M demonstrated a stable performance in 4Q. EBITDA remained flat QoQ with margin at 12.4%.EBIT margin for automotive division expanded 57 bps QoQ to 7.3 % and for FES 13 bps to 16.7%.
Outstanding bookings stands at 292K+ (including XUV700 at 78K and Scorpio-N at 117K) and per month, booking rate is 57k vs supply of 33k vehicles. We expect automotive margin in FY24 to see further improvement led by economies of scale. However, we reckon that margins may not see substantial improvement in automotive segment as M&M’s new EVs launches are likely to be aggressively priced to gain volumes.
Management guided low single digit growth in tractor segment. Despite muted outlook in tractor segment, we expect Farm segment earnings would be supported by strong operating leverage in Farm machinery segment, the company is targeting 10x revenue growth by FY26.
We believe the stock to trade at a premium to historical multiple as the company moves higher to its guided ROE target of 18%. Our SOTP valuation comes at Rs.1568 (We value the core business at Rs.1048/share (17x FY25E core EPS) and subsidiaries at Rs.293/share +Value of EVs arm Rs.227). Maintain BUY.
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