Emkay Shares and Stock Brokers maintained a BUY rating on Mahindra and Mahindra with a target price of Rs 410.
The analysts at Emkay say that M&M`s Q2FY09 performance was in line with expectation aided by higher inventory accretion and lower tax rate. The analysts said that while net sales at 31.1 billion were below their expectation by 4%, adjusted EBIDTA at Rs 2.5 billion was ahead of expectation by 4%. Adjusted net profits at Rs 2.3 billion, were in line with the expectation. The improved operating performance is largely attributable to significant inventory accretion, the analyst said.
Posts the recent correction in the stock price and improved performance of Punjab Tractors (which will be merged w.e.f. April 2009), the analysts believe that current stock price factors in a steep discount for its subsidiaries, which is unwarranted for. Infact currently, the implied discount for subsidiaries works out to be 95%. The analysts have upgraded their rating on the stock from HOLD to BUY with a target price of Rs 410.
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