Mahindra held an analyst meet with Pawan Goenka and other senior management. Management is reasonably optimistic on FY17 outlook on both autos and tractors. On the autos side, while overall industry growth will be subdued, given the extra duties in the budget and the Supreme Court’s focus on diesel vehicles, Mahindra hopes to continue the momentum built by its recent launches despite no new significant launch expected in FY17. For the medium term, it is a bit concerned about the large price hikes needed to comply with BS-VI and safety norms. It plans to launch gasoline options on its vehicles by mid-FY19.
If we get a good monsoon, management is confident of a 10% industry growth on tractors with chances of an upside surprise. It has recently launched the Yuvo series of tractors in the 30-45hp segment (85% of volumes) and is hopeful of gaining share as well. While the prospects of a good monsoon are a positive sign, we believe Mahindra has structural challenges on its UV business as competitive intensity increases and it has to shift to gasoline given the momentum against diesel in the country. We stay neutral.
Management highlighted that SIAM recently reduced its FY17 growth target from 8-10% to 5-6%. It believes
the reduction in growth target has been done to account for the imposition of infrastructure cess in the budget, and the pressure on diesel on account of the case in Supreme Court.