X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
M & M: Realistic valuations? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 5, 2000

    M & M: Realistic valuations?

    Mahindra & Mahindra's (M & M) stock price has under-performed the market by close to 40% in the past six months. However for the period from the beginning of December'99 to mid February'2000 M & M's shares outperformed the market by 42%. This was on the back of the news that M & M's telecom software subsidiary, Mahindra British Telecom (MBT) was coming out with an IPO. During this period the market gave M & M software valuations, hence its stock price more than doubled during this time.

    But what has happened to M & M's stock price in the past few months, considering that MBT has announced that it will be going public in the next couple of months. Why has the stock not performed ?

    The reasons are many:

    • The software sector though continuing to still be in the limelight, is not attracting as many investors as it did in the past. This is due to more realistic valuations in the market currently.

    • M & M's performance in the past few months has been slow as its main businesses have not been performing well. The tractor industry has seen a 16% decline in volumes from April-July'2000. Despite this M & M's market share has gone upto 36%, the growth for its tractor division has been 3% for the first four months of the current year.

    • Besides, due to higher competition in the multi utility market the company's market share and volumes in this segment have fallen. The company's recent launch of Bolero, will help it gain back its lost market share in the 2H. The company's UV volumes have fallen by 15% YoY from April-July'2000.

    • Operating margins fell in the 1QFY01 to 8.3% from 12.0% in the 1QFY00, this was mainly due to higher costs related to emission norms, adverse product mix and lower volumes.

    M & M's performance in the second half is expected to be better due to normal monsoons and consumers adjusting to higher sales tax in certain states.

    However we feel that in the past the valuations given to M & M were unwarranted. This is also because of the software sector hype in the market. M & M's shareholders gain only to the extent of higher dividend income to the company from its wholly owned subsidiary Mahindra Information Technology Ltd, which has a 57% stake in MBT.

    However keeping in mind that from FY02 companies will be have consolidated balance sheets, M & M's fundamentals would improve as MBT is expected to continue to show good growth rates. The improved fundamentals of M & M would then result in getting it higher valuations.

    On the current price of Rs 187 it is trading at 7.8 xFY00 earnings

     

     

    Equitymaster requests your view! Post a comment on "M & M: Realistic valuations?". Click here!

      
     

    More Views on News

    Mahindra & Mahindra Ltd: Robust Performance amid Uncertainties! (Quarterly Results Update - Detailed)

    Jul 4, 2017

    The Growth in the Farm Segment offsets mediocre performance in the auto business.

    Mahindra & Mahindra Ltd: Tractor Demand offsets the Notebandi hit Auto Segment! (Quarterly Results Update - Detailed)

    Mar 20, 2017

    Mahindra & Mahindra has announced its financial results for the third quarter of the financial year 2016-17 (2QFY17).

    Mahindra & Mahindra Ltd: Tractors Demand Upbeat, Gaining Market Share in Auto (Quarterly Results Update - Detailed)

    Nov 22, 2016

    Mahindra & Mahindra has announced its financial results for the second quarter of the financial year 2016-17 (2QFY17). During the quarter, revenues grew by 15.6% YoY and adjusted net profits grew by 18.5%.

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    M&M SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK M&M

    M&M 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE M&M WITH

    MARKET STATS