STOCK UPDATE
Mahindra & Mahindra
Cluster: Apple Green
Recommendation: Hold
Price target: Rs809
Current market price: Rs785
Ssangyong deal to strengthen luxury portfolio
Mahindra and Mahindra (M&M) has signed a definitive agreement with South Korea?s Ssangyong Motor Company (Ssangyong) to acquire a 70% stake in the latter for $463 million (approximately Rs2,080 crore) of which $378 million (approximately Rs1,700 crore) is from new stocks and $85 million (approximately Rs380 crore) from corporate bonds. The acquisition will be finalised by March 2011. Ssangyong would utilise the money to repay debt.
We maintain our Hold recommendation and price target for M&M. We expect its automotive volumes (including pick-ups) to grow by 29% and tractor volumes to grow by 10.8% in FY2011. Our sum-of-the-parts (SOTP) valuation target for M&M is Rs809 per share (the core business is valued at 13x FY2012 earnings and the subsidiaries are valued at Rs140 per share).
Click here to read report: Investor's Eye
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