Mahindra & Mahindra (MAHMAH)

CMP: | 846 Target: | 1,000 (18%) Target Period: 12 months BUY

May 30, 2021 Aggressive growth plans unveiled…

Mahindra & Mahindra (M&M) reported soft Q4FY21 results. Standalone net sales were at | 13,512 crore (up 47.8% YoY, down 4.9% QoQ). Automotive Particulars ASPs were up 7% QoQ to | 7.41 lakh/unit while tractor ASPs grew 2% QoQ to | 5.3 lakh/unit. Standalone EBITDA margins at 13.2% were down 280 bps Particular Amount Market Capitalization (₹ crore) 1,05,200 QoQ amid 110 bps sequential decline in gross margins. Automotive EBIT Total Debt (FY21P, ₹ crore) 7,595 margins fell ~330 bps QoQ to 3.1% while tractor margins were down ~140 Cash and Inv (FY21P, ₹ crore) 10,744 bps QoQ to 22%. Standalone PAT came in at | 48.4 crore impacted by a EV (FY21P, ₹ crore) 1,02,051 large impairment hit of | 887 crore in relation to long term investments and 52 week H/L (₹) 952 / 424

Result Update Result lower other income. M&M declared a dividend of | 8.75/share for FY21. Equity capital (₹ crore) (FY21P) 597.4 Face value (₹) ₹ 5 Product excitement underpins growth ambitions M&M outlined its vision for a healthy operational performance across all key Price Performance

parameters over the longer term. It is looking at 15-20% CAGR sales and 1100 20,000 EPS CAGR by 2025 along with a sharp improvement in profitability (RoE, 880 15,000 660 RoCE ambition set at >18%). The company seeks to play upon its core 10,000 strengths by regaining SUV leadership and consolidating its hold over the 440 220 5,000 <3.5T LCV and tractor segments. As part of the drive, M&M revealed that 0 0 new product introduction is set to gain sizeable momentum, with the action

set to span (1) nine PV models, (2) 14 LCV models and (3) 37 tractor models

Nov-19 Nov-20 Nov-18

May-19 May-20 May-21 May-18 over by 2026. PV pipeline incorporates four electric variants (including for M&M (LHS) Nifty (RHS)

XUV300) and two new EVs while the first fully electric LCV for last mile mobility needs (‘Atom’) could be launched as soon as 2022. Definitive Key Highlights roadmap for EV launches across PV, 3-W and CV ranges is encouraging and demonstrative of ambitions in the sunrise space, with M&M having indicated  Revenues drop by 5% QoQ in Q4FY21 while margins declined EV capex spend of | 3,000 crore in FY22E-24E. by ~280 bps QoQ to 13.2% Automotive segment to outperform tractors  Robust product launch pipeline unveiled and seen as a key to Supply constraints related to semiconductor shortages and localised achieve & maintain dominance in lockdowns amid the ongoing second Covid-19 wave are set to impact near core segments (SUV, LCV, FES).

term volumes across automotive and tractor divisions. As an element of

Retail Equity Research Equity Retail normalcy returns post Q1FY22E, however, we expect automotive segment Risks to our call

– to outperform given the refreshed push for personal mobility, intact offtake  Elongated recovery in volumes from e-commerce industry, good response for new Thar and relatively due to supply constraint higher base for tractor segment. Related mix normalisation along with persistence persistent nature of sharp commodity cost inflation is seen leading to a  Delays in new product dilution of blended margin profile. We build 16.5%, 6.2% automotive, tractor introduction volume CAGR over FY21-23E with EBITDA margins seen at 13% by FY23E.

Valuation & Outlook Research Analyst Securities ICICI We expect 16% sales CAGR in FY21-23E with adjusted PAT seen at | 4,507 Shashank Kanodia, CFA [email protected] crore in FY23E. Focus on prudent capital allocation, healthy growth plans and EV proactiveness help us maintain our positive stance on M&M. We Jaimin Desai retain BUY, valuing it at a SOTP-based unchanged target price of | 1,000 [email protected] (10x FY23E EV/EBITDA for base business; 30% holding company discount to its investments in both listed as well as unlisted businesses). Key Financial Summary

Particulars FY19 FY20 FY21P FY22E FY23E CAGR (FY21P -23E) Net Sales 53,614.0 45,487.8 45,041.0 53,464.6 60,630.1 16.0% EBITDA 6,639.6 5,798.0 6,506.1 6,286.4 7,858.6 9.9% EBITDA Margins (%) 12.4 12.7 14.4 11.8 13.0 Net Profit 4,796.1 1,330.4 268.6 3,563.3 4,507.2 309.6% Adjusted Net Profit 4,818.6 2,190.4 942.5 3,563.3 4,507.2 118.7% EPS (₹) 40.2 11.2 2.3 29.9 37.8 P/E 21.0 75.9 375.8 28.3 22.4 RoNW (%) 14.1 6.4 2.7 9.6 11.1

RoCE (%) 12.3 8.8 9.5 8.2 10.5 Source: Company, ICICI Direct Research Result Update | Mahindra & Mahindra ICICI Direct Research

Exhibit 1: Variance Analysis Q4FY21 Q4FY21E Q4FY20 YoY (%) Q3FY21 QoQ (%) Comments Revenues were slightly above our estimates tracking Total Operating Income 13,512.4 13,128.1 9,143.7 47.8 14,215.9 -4.9 7% QoQ rise in automotive ASPs to | 7.41 lakh/unit. Raw Material Expenses 9,690.0 9,429.8 6,147.2 57.6 10,042.6 -3.5 Gross margins slid 110 bps QoQ Employee Expenses 723.6 748.3 617.8 17 756.1 -4 Other expenses rose sequentially on absolute basis Other expenses 1,309.6 1,115.9 1,243.9 5.3 1,139.5 14.9 despite lower sales QoQ EBITDA 1,789.3 1,834.1 1,134.8 57.7 2,277.8 -21.4 Margins came in lower than estimates primarily on EBITDA Margin (%) 13.2 14.0 12.4 83 bps 16.0 -278 bps account of higher than expected other expenses Other income came in far lower than expected amid Other income 131.0 551.1 314.7 -58.4 569.9 -77.0 absence of dividend pay-outs by subsidiaries Depreciation 558.7 603.2 583.6 -4.3 571.4 -2.2 Interest 95.2 101.0 33.5 184 99.7 -5 Tax 331.3 423.6 554.4 -40.2 454.2 -27.1 PAT undershot expectations on account of | 887 PAT 48.4 1,257.3 (2,502.5) -101.9 30.9 56.6 crore charge towards impairment of investments and lower other income EPS 1.4 10.5 9.0 -84.9 1.2 16.4 Key Metrics Auto ASPs were at | 7.41 lakh/ unit vs. estimate of Auto revenues (| crore) 8,026.7 7,723.4 5,636.2 42.4 8,464.0 -5.2 | 7.13 lakh/unit Tractor ASPs were along expected lines at | 5.30 FES revenues (| crore) 4,975.5 4,973.6 3,111.0 59.9 5,281.5 -5.8 lakh/unit

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates FY22E FY23E (₹ Crore) Old New % Change Old New % Change Comments Revenue estimates stand revised lower on account of lowering of volume estimates. Supply constraints are seen impacting Revenue 56,987 53,465 -6.2 63,315 60,630 -4.2 automotive segment in the near term while high base is seen as limiting growth at the tractor division EBITDA 6,834 6,286 -8.0 8,216.0 7,859 -4.3 Margin estimates are held broadly steady with ~20 bps decline EBITDA Margin (%) 12.0 11.8 -23 bps 13.0 13.0 -1 bps in estimates for FY22E amid commodity costs inflation PAT 4,293 3,563 -17.0 5,344.0 4,507 -15.7 PAT estimates are lower tracking downward revision in sales EPS (₹) 36.0 29.8 -17.0 44.8 37.7 -15.7 estimates and lowering of other income estimates. Source: ICICI Direct Research

Exhibit 3: Assumptions Current Earlier Comments Units FY19 FY20 FY21P FY22E FY23E FY21P FY22E FY23E Automotive volumes 6,08,597 4,76,043 3,52,281 4,16,961 4,78,371 3,45,464 4,79,005 5,23,099 Total volumes at M&M are seen growing at a Automotive ASPs (₹) 5,80,892 5,96,766 7,10,075 7,52,723 7,67,854 6,95,138 7,07,861 7,25,629 CAGR of ~11.5% over FY21-23E. Automotive volumes are seen growing at ~16.5% CAGR FES Volumes 3,30,436 3,01,915 3,54,498 3,77,301 3,99,939 3,61,230 4,05,377 4,37,807 while tractor sales volume are seen growing at FES ASPs (₹) 5,10,679 5,10,158 5,19,983 5,38,040 5,48,855 5,17,219 5,27,251 5,36,384 ~6.2% CAGR

Source: ICICI Direct Research

ICICI Securities |Retail Research 2 Result Update | Mahindra & Mahindra ICICI Direct Research

Q4FY21 earnings conference call highlights

 M&M outlined that by 2025 it wants to (1) work towards 15-20% revenue CAGR along with 15-20% EPS growth; (2) deliver 18% RoE and >18% RoCE; (3) achieve SUV segment leadership and provide a strong EV play; (4) strengthen market leadership in < 3.5T LCVs and (5) grow tractor market share along with achieving robust growth in farm mechanisation products

 Semiconductor shortages are affecting ECUs for engines, infotainment systems and airbags. The supply challenges are seen improving by August 2021 in a gradual manner. The company is prioritising models like Thar, XUV300, Scorpio and Bolero at the expense of Marazzo, XUV500, pickups and SCVs

 Underlying demand remains healthy, with a rebound expected from June-July. Macroeconomic factors impacting tractor offtake continue to be supportive and there has been a pickup in rural sentiment over the past week as Covid cases peak and the monsoon approaches. For full year FY22E, the tractor industry is seen posting low single digit growth, with M&M expected to outperform the industry. Over a three to five-year period, there exists enough headroom for ~8% industry CAGR volume growth

 Thar waiting period stands at ~10 months with total bookings at > 55,000 units. XUV300 waiting period stands at 12 weeks while that for Scorpio and Bolero is placed at six to eight weeks

 The company expects international auto and farm subsidiaries to post ~| 300 crore loss at PAT level in FY22E vs. | 2,358 loss in FY21 post classification of SsangYong Motor as discontinued operations. In the tractor division, global subsidiaries delivered turnaround in EBIT performance with FY21 figure at negative | 36 crore vs. negative | 650 crore in FY20.

 Capex spends for FY22-24 are seen at ~| 12,000 crore - | 6,000 crore for automotive segment, | 3,000 crore for EVs and | 3,000 crore for the farm segment. Over that time, investment spends for automotive and farm segments is seen at | 1,500 crore, with a further | 3,500 crore earmarked for investments in group companies

Exhibit 4: Operational improvement in international auto & farm operations

Pursuant to capital allocation relook, most international farm and auto subsidiaries delivered a strong improvement in profitability during FY21

Source: Company, ICICI Direct Research Exhibit 5: Results of cost reduction efforts in automotive business

Automotive business has achieved fixed cost reduction of ₹ 900 crore over the past two years

Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 3 Result Update | Mahindra & Mahindra ICICI Direct Research

 M&M will be launching nine new products by 2026 on the automotive side, of which four would be electrified offerings of present models while two would be fully electric (Born EV). In <3.5T LCV portfolio, 14 new product launches over that time frame would include four fully electric models. The PV range would get its first Born EV offering by 2025-26 while the same in the LCV range could be introduced by as early as 2021-22 to cater to last mile connectivity segment

Exhibit 6: PV product launch pipeline

Source: Company, ICICI Direct Research

Exhibit 7: LCV product launch pipeline

Source: Company, ICICI Direct Research

Exhibit 8: Product launch pipeline under ‘Project K2’ for tractors

Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 4 Result Update | Mahindra & Mahindra ICICI Direct Research

Financial story in charts

Exhibit 9: Topline trend

70,000 25 20 60,000 18.7 15 13.4 50,000 We expect sales to grow at ~16% CAGR in FY21- 10.5 10.1 10 23E amid ~11.5% blended volume CAGR

40,000 5

crore) (%)

₹ - ( 30,000 (1.0) (5) 20,000 (10) 10,000

(15.2) (15)

48686 48686 53614 45488 45041 53465 60630 60630 - (20) FY18 FY19 FY20 FY21P FY22E FY23E

Total Operating Income Growth (%)

Source: Company, ICICI Direct Research

Exhibit 10: Segment wise revenue trend 12,000

10,500

9,000

7,500 Segment wise revenue mix for quarter i.e., Q4FY21 was at automotive: tractor: 61:39

crore) 6,000

₹ ( 4,500

3,000

1,500

10,442 10,442

3,631 3,631 7,642 4,278 5,636 3,111 2,052 3,341 6,472 4,976 3,206 3,206 8,101 4,382 7,030 4,835 8,464 5,282 8,027

0

Q4FY19 Q1FY20 Q2FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q3FY20 Q4FY20 Automotive Farm Equipment

Source: Company, ICICI Direct Research

Exhibit 11: Segment wise volume trend

200 180 160 140 120 In Q4FY21, automotive segment volumes rose 17.2% 100 (000's) 80 YoY to 1.08 lakh units while sales for tractors rose 60 58.3% YoY to 94k units 40

20

175 120 132 122 132 102 108

61 86 72 92 59 66 92 94 84 30 93

0

Q4FY19 Q1FY20 Q3FY20 Q4FY20 Q1FY21 Q3FY21 Q4FY21 Q2FY20 Q2FY21

Automotive Farm Equipment

Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 5 Result Update | Mahindra & Mahindra ICICI Direct Research

Exhibit 12: EBITDA and EBITDA margin trend

9,000 16 8,000 14.4 7,000 14 6,000 13.0 12.8 12.7 We build in 11.8% & 13% as EBITDA margins in 5,000 12.4

12 crore) 11.8 (%) FY22E and FY23E, respectively

₹ 4,000 ( 3,000 2,000 10

1,000

6224 6224 6640 5798 6506 6286 6286 7859 - 8 FY18 FY19 FY20 FY21P FY22E FY23E

EBITDA EBITDA Margins (%)

Source: Company, ICICI Direct Research

Exhibit 13: Profitability (adjusted PAT) trend

6,000 300 278.1 250 5,000 200 Adjusted PAT is expected to grow to ₹4,507 crore 4,000 150 by FY23E 100

3,000

crore) (%)

₹ 50 ( 25.7 19.1 26.5 2,000 -

(54.5) (57.0) (50) 1,000

(100)

942 942

4046 4046 4819 4507 2190 2190 3563 - (150) FY18 FY19 FY20 FY21P FY22E FY23E

PAT Growth (%)

Source: Company, ICICI Direct Research

Exhibit 14: Return ratios trend

16

14

12

10 (%) 8 RoCE profile at M&M is seen improving to ~11% 6 levels gradually by FY23E 4

2

13.4 12.3 14.1 10.5 11.1 13.6

8.8 6.4 9.5 2.7 8.2 9.6 - FY18 FY19 FY20 FY21P FY22E FY23E RoCE RoE

Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 6 Result Update | Mahindra & Mahindra ICICI Direct Research

Exhibit 15: Segment-wise, model-wise volumes at M&M in FY21 Dom estic Exports Total % of sales mix Dom estic Particulars F Y20 F Y21 YoY % F Y20 F Y21 YoY % F Y20 F Y21 YoY % F Y20 F Y21 MS % I. Passenger cars 858 9 (99.0) - 6 NA 858 15 (98.3) 0.2 0.0 - C ompact (1) - (100.0) - - NA (1) - (100.0) (0.0) - Verito Vibe (1) - (100.0) - - NA (1) - (100.0) (0.0) - Super compact 859 9 (99.0) - 6 NA 859 15 (98.3) 0.2 0.0 V erito 859 9 NA - 6 NA 859 15 (98.3) 0.2 0.0 II. Utility Vehicles 1,79,405 1,55,530 (13.3) 10,348 5,928 (42.7) 1,89,753 1,61,458 (14.9) 39.9 45.8 14.7 < 4m 1,00,645 1,10,105 9.4 8,155 4,693 (42.5) 1,08,800 1,14,798 5.5 22.9 32.6 Bolero Power Plus 48,619 59,657 22.7 21 107 409.5 48,640 59,764 22.9 10.2 17.0 K UV 100 1,798 297 (83.5) 6,458 3,834 (40.6) 8,256 4,131 (50.0) 1.7 1.2 NuvoS port 19 - (100.0) - - NA 19 - (100.0) 0.0 - T har 2,151 14,186 559.5 64 105 64.1 2,215 14,291 545.2 0.5 4.1 T UV 300 10,482 - (100.0) 198 255 28.8 10,680 255 (97.6) 2.2 0.1 X UV 300 37,576 35,965 (4.3) 1,414 392 (72.3) 38,990 36,357 (6.8) 8.2 10.3 4-4.4m 1,646 - (100.0) 322 170 (47.2) 1,968 170 (91.4) 0.4 0.0 B olero 1,646 - NA 322 170 (47.2) 1,968 170 (91.4) 0.4 0.0 4.4-4.7m 76,038 45,155 (40.6) 1,871 1,065 (43.1) 77,909 46,220 (40.7) 16.4 13.1 Bolero Plus 8,779 - (100.0) - - NA 8,779 - (100.0) 1.8 - Maraz z o 12,693 3,265 (74.3) 8 - (100.0) 12,701 3,265 (74.3) 2.7 0.9 S corpio 38,826 34,325 (11.6) 1,156 599 (48.2) 39,982 34,924 (12.7) 8.4 9.9 TUV300 plus 1,061 - (100.0) - - NA 1,061 - (100.0) 0.2 - X uv500 12,607 7,565 (40.0) 707 466 (34.1) 13,314 8,031 (39.7) 2.8 2.3 X ylo 2,072 - (100.0) - - NA 2,072 - (100.0) 0.4 - ₹20-30 lakh 1,076 270 (74.9) - - NA 1,076 270 (74.9) 0.2 0.1 Alturas G 4 1,076 270 (74.9) - - NA 1,076 270 (74.9) 0.2 0.1 III. V ans 6,679 1,676 (74.9) 1,015 798 (21.4) 7,694 2,474 (67.8) 1.6 0.7 1.5 Hard tops 4,904 1,607 (67.2) 975 798 (18.2) 5,879 2,405 (59.1) 1.2 0.7 Maxximo 33 - (100.0) 973 798 (18.0) 1,006 798 (20.7) 0.2 0.2 S upro 4,871 1,607 (67.0) 2 - (100.0) 4,873 1,607 (67.0) 1.0 0.5 S oft tops 1,775 69 (96.1) 40 - (100.0) 1,815 69 (96.2) 0.4 0.0 Jeeto 1,390 - (100.0) - - NA 1,390 - (100.0) 0.3 - Maxximo 20 - (100.0) 40 - (100.0) 60 - (100.0) 0.0 - S upro 365 69 (81.1) - - NA 365 69 (81.1) 0.1 0.0 A. Total PV (I + II + III) 1,86,942 1,57,215 (15.9) 11,363 6,732 (40.8) 1,98,305 1,63,947 (17.3) 41.7 46.5 5.8 IV. Passenger 3-W 47,282 10,635 (77.5) 890 224 (74.8) 48,172 10,859 (77.5) 10.1 3.1 7.9 V. Cargo 3-W 14,903 9,890 (33.6) 763 131 (82.8) 15,666 10,021 (36.0) 3.3 2.8 12.0 B. Total 3-W (IV + V) 62,185 20,525 (67.0) 1,653 355 (78.5) 63,838 20,880 (67.3) 13.4 5.9 9.5 V I. M&HC V 5,857 3,110 (46.9) 341 161 (52.8) 6,198 3,271 (47.2) 1.3 0.9 G oods 5,857 3,110 (46.9) 341 161 (52.8) 6,198 3,271 (47.2) 1.3 0.9 2.0 V II. L C V 1,93,274 1,53,049 (20.8) 13,566 11,118 (18.0) 2,06,840 1,64,167 (20.6) 43.5 46.6 P assenger 2,483 101 (95.9) 104 - (100.0) 2,587 101 (96.1) 0.5 0.0 0.8 G oods 1,90,791 1,52,948 (19.8) 13,462 11,118 (17.4) 2,04,253 1,64,066 (19.7) 43.0 46.6 38.6 C. Total CV (VI + VII) 1,99,131 1,56,159 (21.6) 13,907 11,279 (18.9) 2,13,038 1,67,438 (21.4) 44.8 47.5 27.5 D. Total automotive (A + B + C) 4,48,258 3,33,899 (25.5) 26,923 18,366 (31.8) 4,75,181 3,52,265 (25.9) 100.0 100.0 E. Total tractors 2,91,901 3,43,833 17.8 10,014 10,665 6.5 3,01,915 3,54,498 17.4 38.2 F. Total sales (D + E) 7,40,159 6,77,732 (8.4) 36,937 29,031 (21.4) 7,77,096 7,06,763 (9.1)

Source: SIAM, ICICI Direct Research; Note – MS% =market share %

ICICI Securities |Retail Research 7 Result Update | Mahindra & Mahindra ICICI Direct Research

Exhibit 16: Valuation matrix (SOTP Valuation) Valuation Matrix (SOTP) Automotive Business (UV+PV+CV+Tractors) ₹crore ₹/share Remark Standalone business FY23E EBITDA 7,859 Assigning EV/EBITDA Multiple of 10x 10.0 Enterprise Value 78,586 659 Net Debt (FY23E) (1,680) -14 Value of Standalone Business (A) 80,266 675 Mahindra Vehicle Manufacturers Ltd Investment made by M&M (wholly owned subsidiary) 4,065 Assigning 1x P/B on investment value 1.0 Value of MVML attributable to M&M (B) 4,065 35 Total value of automobile business (C= A+B) 710 M&M Estimated Contribution to Value of Investments (listed companies) Remark stake value M&M (%) ₹ crore ₹crore ₹/share 26 99,147 25,778 216 Current market cap M&M Financial Services 52 19,739 10,296 86 Current market cap Mahindra Life space 52 2,678 1,379.10 12 Current market cap Mahindra CIE 11 7,315 836.8 7 Current market cap Mahindra Holidays & Resorts 67 3,451 2322.5 19 Current market cap Other subsidiaries & investments 8,571 72 Total Value of subsidiaries & associates (D) 49,183.2 412 Value of investments post 30% holding company discount (E = 0.7*D) 290 M&M Target Price (value of equity per share , C+E) 1,000 Source: ICICI Direct Research

Exhibit 17: Valuation Summary Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (₹ cr) (%) (₹) (%) (x) (x) (%) (%) FY19 53,614 10.1 40.2 14.7 21.0 15.2 14.1 12.3 FY20 45,488 (15.2) 11.2 (72.3) 46.1 17.6 6.4 8.8 FY21P 45,041 (1.0) 2.3 (79.8) 107.1 15.7 2.7 9.5 FY22E 53,465 18.7 29.9 1,226.6 28.3 16.5 9.6 8.2 FY23E 60,630 13.4 37.8 26.5 22.4 13.2 11.1 10.5

Source: Company, ICICI Direct Research

Exhibit 18: Shareholding pattern Mar-20 Jun-20 S ep-20 Dec-20 Mar-21 P romoters 19.9 19.6 19.6 19.4 19.5 F II 33.9 34.6 34.7 37.9 38.9 DII 28.1 29.3 30.7 28.2 27.4

O thers 18.1 16.5 15.0 14.4 14.3 Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 8 Result Update | Mahindra & Mahindra ICICI Direct Research

Financial Summary (Standalone)

Exhibit 19: Profit and loss statement | crore Exhibit 20: Cash flow statement | crore (Year-end March) FY20 FY21P FY22E FY23E (Year-end March) FY20 FY21P FY22E FY23E Total operating Income 45,487.8 45,041.0 53,464.6 60,630.1 Profit after Tax 3,344.4 3,931.9 3,563.3 4,507.2 Growth (%) -15.2 -1.0 18.7 13.4 Add: Depreciation 2,222.6 2,233.0 2,405.9 2,607.1 Raw Material Expenses 31,632.6 31,613.0 39,003.2 43,793.9 (Inc)/dec in Current Assets 2,621.7 -853.1 -1,515.6 -1,398.4 Employee Expenses 2,880.1 2,858.8 3,044.1 3,338.9 Inc/(dec) in CL and Provisions -3,857.5 4,671.6 697.2 1,801.2 Other Expenses 5,177.1 4,063.1 5,130.9 5,638.6 CF from operating activities 4,331.2 9,983.5 5,150.7 7,517.1 Total Operating Expenditure 39,689.8 38,534.9 47,178.2 52,771.5 (Inc)/dec in Investments 82.3 -7,790.2 -1,800.0 -500.0 EBITDA 5,798.0 6,506.1 6,286.4 7,858.6 (Inc)/dec in Fixed Assets -4,125.1 -2,840.5 -4,000.0 -4,000.0 Growth (%) -12.7 12.2 -3.4 25.0 Others 791.7 -1,626.0 -296.9 -252.6 Depreciation 2,222.6 2,233.0 2,405.9 2,607.1 CF from investing activities (3,251.1) (12,256.8) (6,096.9) (4,752.6) Interest 113.3 370.9 356.2 321.4 Issue/(Buy back) of Equity 0.7 0.9 0.0 0.0 Other Income 1,667.8 1,221.3 1,239.4 1,095.4 Inc/(dec) in loan funds 496.5 4,527.0 -350.0 -1,100.0 PBT 5,129.9 5,123.6 4,763.8 6,025.6 Dividend paid & dividend tax -336.4 -1,043.9 -894.8 -1,193.0 Others (incl exceptional item) 2,014.0 3,663.3 0.0 0.0 Others -736.1 808.5 0.0 0.0 Total Tax 1,785.5 1,191.7 1,200.5 1,518.5 CF from financing activities (575.4) 4,292.5 (1,244.8) (2,293.0) PAT 1,330.4 268.6 3,563.3 4,507.2 Net Cash flow 504.8 2,019.2 -2,191.0 471.4 Adjusted PAT 2,190.4 942.5 3,563.3 4,507.2 Opening Cash 3,731.6 4,236.4 6,255.6 4,064.7 Growth (%) -72.3 -79.8 1,226.6 26.5 Closing Cash 4,236.4 6,255.6 4,064.7 4,536.1 EPS (₹) 11.2 2.2 29.8 37.7 Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 21: Balance Sheet | crore Exhibit 22: Key ratios (Year-end March) FY20 FY21P FY22E FY23E (Year-end March) FY20 FY21P FY22E FY23E Liabilities Per share data (₹) Equity Capital 596.5 597.4 597.4 597.4 EPS 11.2 2.3 29.9 37.8 Reserve and Surplus 33,871.3 33,904.5 36,573.1 39,887.2 Cash EPS 29.8 21.0 50.0 59.6 Total Shareholders funds 34,467.8 34,501.9 37,170.5 40,484.6 BV 288.9 289.2 311.6 339.3 Total Debt 3,068.0 7,595.0 7,245.0 6,145.0 DPS 2.4 8.8 7.5 10.0 Deferred Tax Liability 1,408.2 1,343.2 1,343.2 1,343.2 Cash Per Share 53.9 90.1 74.2 65.6 Others 1,621.2 1,540.5 1,828.6 2,073.7 Operating Ratios (%) Total Liabilities 40,565.3 44,980.7 47,587.3 50,046.5 EBITDA Margin 12.7 14.4 11.8 13.0 Assets PBT / Net sales 7.9 9.5 7.3 8.7 Gross Block 24,510.1 26,527.9 31,360.0 36,360.0 PAT Margin 2.9 0.6 6.7 7.4 Less: Acc Depreciation 14,115.5 16,348.5 18,754.4 21,361.5 Inventory days 27.3 32.1 30.0 30.0 Net Block 10,394.6 10,179.4 12,605.6 14,998.5 Debtor days 24.1 19.0 20.0 20.0 Capital WIP 4,009.5 4,832.2 4,000.0 3,000.0 Creditor days 54.5 80.9 70.0 70.0 Total Fixed Assets 14,404.0 15,011.5 16,605.6 17,998.5 Net Working Capital days -3.1 -29.9 -20.0 -20.0 Other investments 17,748.5 19,576.6 21,076.6 23,076.6 Return Ratios (%) Liquid Investments 2,189.7 4,488.5 4,788.5 3,288.5 RoE 6.4 2.7 9.6 11.1 Inventory 3,400.9 3,955.5 4,394.3 4,983.3 RoCE 8.8 9.5 8.2 10.5 Debtors 2,999.0 2,342.9 2,929.6 3,322.2 RoIC 11.9 14.5 11.2 13.4 Loans and Advances 512.0 756.9 898.5 1,018.9 Valuation Ratios (x) Other current assets 1,297.0 1,863.3 2,211.8 2,508.2 P/E 75.9 375.8 28.3 22.4 Cash 4,236.4 6,255.6 4,064.7 4,536.1 EV / EBITDA 17.6 15.7 16.5 13.2 Total Current Assets 12,951.7 15,824.0 15,148.7 17,018.6 EV / Net Sales 2.2 2.3 1.9 1.7 Creditors 6,785.8 9,988.2 10,253.5 11,627.7 Market Cap / Sales 2.3 2.3 2.0 1.7 Provisions 595.6 486.5 499.4 566.3 Price to Book Value 2.9 2.9 2.7 2.5 Total Current Liabilities 7,381.4 10,474.6 10,752.9 12,194.0 Solvency Ratios Net Current Assets 5,570.4 5,349.4 4,395.8 4,824.5 Debt/Equity 0.1 0.2 0.2 0.2 Application of Funds 40,565.3 44,980.7 47,587.3 50,046.5 Current Ratio 0.9 0.7 0.8 0.8 Source: Company, ICICI Direct Research Quick Ratio 0.5 0.4 0.5 0.5 Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 9 Result Update | Mahindra & Mahindra ICICI Direct Research

Exhibit 23: ICICI Direct coverage universe (Auto & Auto Ancillary) Sector / Company CMP TP M Cap EPS (₹) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) (₹) (₹) Rating (₹ Cr) FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E Apollo Tyre (APOTYR) 225 260 BUY 14,289 5.5 9.9 16.2 40.8 22.8 13.9 6.8 7.0 5.1 7.6 6.1 9.1 6.4 5.3 8.2 (ASHLEY) 125 150 Buy 36,589 -1.7 1.4 4.6 -72.7 89.8 27.5 124.5 25.7 13.9 -3.6 6.1 16.4 -6.9 5.9 17.5 (BAAUTO) 4,220 4,500 BUY 1,22,114 157.4 183.5 210.0 26.8 23.0 20.1 20.3 16.7 14.2 18.2 21.9 25.2 18.1 20.6 23.1 Balkrishna Ind. (BALIND) 2,180 2,250 Buy 42,143 59.8 68.2 80.5 36.5 32.0 27.1 23.9 20.5 17.4 19.3 20.4 21.6 19.2 19.0 19.4 (BHAFOR) 690 670 Hold 32,124 -5.2 11.8 19.1 NM 58.7 36.2 47.5 25.4 18.4 1.2 7.1 11.1 3.7 10.2 14.9 (EICMOT) 2,640 2,970 Hold 71,966 49.3 66.7 87.4 53.6 39.6 30.2 36.1 27.7 21.0 11.3 13.5 15.8 11.8 14.3 16.6 Escorts (ESCORT) 1,165 1,140 Hold 14,281 71.2 62.0 76.9 16.4 18.8 15.1 10.0 11.5 9.0 18.7 13.8 14.8 16.2 12.6 13.7 (EXIIND) 190 200 Hold 16,150 8.9 9.3 11.0 16.2 15.6 13.1 11.2 10.7 9.2 14.0 13.8 15.1 11.0 10.5 11.5 Hero Moto (HERHON) 3,000 3,440 Buy 59,910 148.4 170.8 196.5 20.2 17.6 15.3 12.9 10.9 9.4 20.8 23.1 24.5 19.5 20.7 21.7 M&M (MAHMAH) 846 1,000 Buy 1,05,200 2.3 29.9 37.8 375.8 28.3 22.4 15.7 16.5 13.2 9.5 8.2 10.5 2.7 9.6 11.1 (MARUTI) 6,955 6,080 Reduce 2,10,097 140.0 172.9 225.1 49.7 40.2 30.9 31.2 23.2 17.3 4.3 6.6 9.1 8.2 9.5 11.4 Minda Industries (MININD) 570 625 Buy 15,499 5.8 11.6 17.9 97.9 49.0 31.9 23.9 16.6 13.0 8.7 14.2 19.1 8.7 15.9 19.5 Motherson (MOTSUM) 240 225 Hold 75,790 2.5 6.7 8.1 NM 36.0 29.7 17.6 10.2 8.7 6.0 16.3 18.9 7.1 16.1 17.4 (TATMOT) 320 400 Buy 1,15,126 -35.0 17.6 38.3 NM 18.2 8.3 5.1 4.2 2.9 6.4 9.7 14.3 -23.6 10.6 18.8

Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 10 Result Update | Mahindra & Mahindra ICICI Direct Research

RATING RATIONALE ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15% Hold: -5% to 15%; Reduce: -15% to -5%; Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) – 400 093 [email protected]

ICICI Securities |Retail Research 11 Result Update | Mahindra & Mahindra ICICI Direct Research

ANALYST CERTIFICATION

I/We, Shashank Kanodia, CFA, MBA (Capital Markets) and Jaimin Desai, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc. as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co- managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

ICICI Securities |Retail Research 12