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M&M’s Rs 116 bn income (up 6% YoY) surpassed our estimate by 7%.

We improve Mahindra & Mahindra (M&M) to ‘Purchase’ and revise up FY22E core EPS 8% with TP of Rs 721 (earlier
Rs 633) led by sturdy Q2FY21 efficiency; enhancing auto section outlook (lean stock, Thar launch,
restoration in LCVs, provide chain normalisation); secure tractor demand; and leap in worth of listed subsidiaries.

Whereas we preserve our goal PE (16x) and holding firm low cost (30%), there exists potential for re-rating as
M&M demonstrates success of its new UV technique and capital allocation (intent of no loss funding from FY22). Whereas we respect impairment recognition and enterprise closures, H1FY21 did see money help of INR12bn as a part of restructuring in the direction of loss-making companies.

M&M’s Rs 116 bn income (up 6% YoY) surpassed our estimate by 7%. Management on different bills (advertising and marketing, journey
and stuck value rationalisation) translated into sharp EBITDA out efficiency. The corporate has recorded its best-ever EBITDA margin of 17.8%. Income of FES section improved 33% YoY (led by quantity progress of ~30%) to Rs 48bn (EBIT margin at 24.4%, its finest ever). Auto enterprise income contracted ~8% YoY, however EBIT margin improved 70bps YoY to six.5%. We count on antagonistic margin impression resulting from a normalising combine (larger share of auto) to be offset by sturdy value focus.

The renewed technique (yet another try) to revive its volumes in UVs is encouraging.With the launch of Thar,
focus is shifting from creating merchandise for market share acquire to sticking to its core positioning. LCVs are
more likely to revive and may shock on the upside. Astable tractor outlook to offer margin/money circulation cushion. M&M
continues to remain heading in the right direction of its prudent capital allocation technique and specializing in worldwide enterprise that may
generate 18% RoE. It took impairment cost of `11.5bn (particulars not disclosed) and determined to close the plane enterprise.

At present valuation, the risk-reward is beneficial with potential of earnings improve and re-rating. We improve to
‘Purchase/SO’ from ‘Maintain/SP’ with SOTP based mostly TP of Rs 721 (16x March 2022E core EPS of Rs 27, Rs 93 money/share, Rs 197
for subsidiaries). It’s buying and selling at FY21/22E PER of 18.8x/16.9x (ex of listed subsidiaries).

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