There is robust demand for utility vehicles and tractors. Among tractors, Maximo has achieved 16-18 per cent market share, which should rise further. M&M plans to launch a new SUV in FY12 as well as several variants of existing models. In tractors, we see a potential for FY12 volume assumptions to move up given the strong monsoons. Sales of the low-cost tractor Yuvraj should also go up in FY12.
Moreover, M&M sees no incremental competition at its price points in both segments, making it a favorable pick.
Our SOTP target price For M&M works out to Rs. 827, wherein its core business fetches Rs.579 per share and the value of its investments fetches Rs.248 per share. We remain overweight on the stock.
By Angel Broking
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