Dalelorenzo's GDI Blog
30Jun/210

M&M’s focus on costs and cash flow to keep stock in overdrive

ET Intelligence Group: Mahindra& Mahindra’s sustained focus on cash flow generation, read in conjunction with an aggressive product line-up for "the farmers " and automotive segments, is likely to cause an uptick in its ascribed price-earnings( PE) several and the stock may continue its outperformance.M& M’s stock has outshone the Sensex 30 by 20% in the last year. It is now trading at 16 experiences core business earnings, which is at a 20% discount to its five-year core business profits.What has helped the automotive governor is a bunch of currency preservation steps in the past year, which has led to better financial outcomes.Losses from its international affiliates have fallen hugely and free cash flow -- currency from functionings after subtracting capital expenditure -- has risen to nearly Rs 6,700 crore in FY21, a multi-year high, as the company continues to adhere to a rigid fund apportioning policy.M& M has been able to bring down losses of its international raise and vehicle subsidiaries greatly in FY21. The farm subsidiary’s damages have reduced to Rs 131 crore in FY21 from Rs 807 crore in FY20, while the vehicle unit’s loss was lower by Rs 386 crore. On the capacities breast, the automotive business has received a shot in the arm by the encouraging response to its SUV, Thar, which has received around 50,000 bookings so far. Besides, the Bolero and Scorpio produced cumulative monthly sales of 10,000 sections in the March quarter, with a waiting period of 6-8 weeks. M& M plans to launch nine brand-new vehicles by 2026. Automotive revenue changed 43% in the one-fourth on account of a 17% loudnes rise and a 22% increase in average selling price. 8309691 0Even as publication visibility remains hazy, M& M cut down tied expenses by Rs 900 crore in the last two years. As a answer, the operating earning perimeter of the automotive segment rose 90 bps to 5% in the March quarter. The Street is pencilling in 30 -3 5% volume proliferation in passenger vehicles in FY22. The farm paraphernalium business, which subscribed earnings in a tough year, is likely to grow in the mid-single digits in FY22 after a 26% manufacture increment in FY21. However, the company lost market share in tractors due to supply dislocations and expects to claw back in the current season. It plans to launch 37 new tractors over the next five years.M& M has predicted a capex of Rs 17,000 crore for the next three years, greater than the Street’s estimate. If the company can deliver on its lead of 15-20% revenue CAGR and stick with a RoCE of 18% by 2025, it could still be generating reasonable free cash flow.

Read more: economictimes.indiatimes.com

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