Mahindra & Mahindra, Tata Motors and Ashok Leyland Company Performance : PINC RESEARCH

Mahindra & Mahindra, Tata Motors and Ashok Leyland Company Performance : PINC RESEARCHMahindra & Mahindra (M&M) reported impressive dispatches for the month of December '10 across various categories. In the automotive segment, the passenger UVs segment grew by 24%. Pick-up & SCVs had a growth of 46% due to success of `Maximmo'. Logan clocked volumes of 896 units. 3-wheeler dispatches doubled to 5.9K units. Overall domestic automotive dispatches increased by 43% to 32.5K units as against our expectation of 26K units.

Tractor sales also remained robust with a growth of 31% in domestic dispatches to 15K units as against our estimates of 13.5K units. YTD tractor dispatches have recorded growth of 21% against our estimates of 10.3%.

Considering the strong volume growth, we have revised our growth estimate for the tractor segment to 15% from earlier 10%.

We remain positive on the stock and maintain a `BUY' rating with a revised target price of Rs925 based on SOTP valuation.

Tata Motors (TTMT) December'10 sales were above our estimate as Nano dispatches rebounded and commercial vehicles posted a robust growth. Overall dispatches were higher by 30.6% YoY to 67.5k units as against our estimate of 58k units. Domestic MHCV sales were higher by 13.5% to 17k units. LCVs, which have been on secular growth trend, posted an all time high figure of 24.5k units. The extension of a tax holiday in Uttarakhand to new capacities also should provide a further boost to LCVs as the `Ace' mini truck is manufactured here. After hitting a low of 509 units last month, Nano dispatches rebounded to 5784 units. The retail sales of Nano after the recent initiatives taken by the company have moved up and as per our estimates are in the range of 10k units. Indica volumes were higher by 40% to 5,923 units while Indigo was flat at 5,234 units. UV dispatches were at 2,765 units, higher by 61.7%. Exports were higher by 68.2% to 5,809 units. We do not have a rating on the stock.

Aided by a sharp pickup in MHCV Truck dispatches, Ashok Leyland (AL) December'10 volumes were above expectation. The company dispatches grew by 23.8% to 7,568 units as against our estimate of 6,755 units. However, domestic MHCV Bus volumes declined by 5.6% YoY to 2,001 units. The positive surprise was on the MHCV Goods which doubled MoM to 4,353 units. This uptick in MHCV sales have been ahead of our expectation by a month. LCV dispatches were at 57 units. Exports were in line with estimates, doubling YoY to 1,157 units.

The stock is currently trading at 12.4x FY12E estimates. We upgrade the stock to a `BUY' with a price target of Rs76 discounting FY12E earnings 14x.