8.Mahindra & Mahindra Ltd

Mahindra & Mahindra Ltd (MAHMAH), is the flagship company of the Mahindra Group, present in diverse business areas such as 

1. automotive, 
2. farm equipment, 
3. financial services, 
4. I.T services, 
5. hospitality and 
6. infrastructure. 

It is the leader in UVs (56%) and tractors (41%), and is growing significantly in financial services, tourism, infrastructure development, trade and logistics through its various subsidiaries and associate company. Besides thriving in UV and tractor businesses, the company has a sizeable market share in the LCV market (~30%), three wheelers (7%) and two wheelers (~5%). The company has ventured into the M&HCV space through a JV with Navistar International, US. It also acquired majority (70%) stake in Korea-based Ssangyong Motors Company in FY11 to become a global SUV company.

Mahindra & Mahindra dominates the domestic tractors market, commanding 41% market share. 

Three key structural factors—

1. higher farm product prices, 
2. firmer labour wages (notably NREGA), and 
3. greater commercial usage of tractors

 have significantly increased rural incomes and brought smaller farmers (owning <4 hectares of land) into the “tractor purchasing” ambit.

  These factors are likely to drive long-term tractor demand, which Mahindra & Mahindra (M&M) is well-positioned to capitalize on.

MAHMAH is the leader in the UV segment and has managed to keep its market share above 56% currently. MAHMAH, as the leader in the utility vehicle (UV) segment, is well entrenched with strong brands. Further, incremental volumes could come from the LCV/ mini van segment, where we expect the company to regain lost market share with the launch of its sub tonne Maxximo and Gio.
Despite strong growth in automotive segment, M&M is trading at discount to its peers (9.8x FY13E core earnings) mainly due to overhang of possible duty hike on diesel vehicles and poor tractor sales. We believe, volume ramp up of XUV5OO, launch of new Xylo and compact Xylo should drive UV sales and act as positive triggers and would offset weak tractor demand going forward. Given the reversal in investor sentiments on expectation of interest rate cut by RBI, we expect the multiple to expand to the average multiple of 11x in future