December 18, 2015

Maintain buy, on Mahindra & Mahindra, target Rs 1,535: Nomura

In a ruling on Wednesday the Supreme Court of India banned registration of diesel cars and SUVs larger than 2000cc in the National Capital Region (NCR) until 31 March 2016. This is to address concerns of high air pollution in Delhi. The decision will affect M&M as 2% of its auto sector volumes in FY15 came from vehicles that would be covered by the ban. The auto sector contributed ~60% of M&M’s standalone revenues in FY15, thus the revenue impact we estimate will be ~1.2%.

With the stock is already down 5% on this news today and core auto business trading at ~11.3x FY17F EPS for M&M+MVML (Rs 69.9) we believe that above concerns are priced in. We maintain our Buy rating on the stock.

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