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Thursday, Nov 21, 2002

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Scorpio success buoys M&M

Deeptha Rajkumar

KOCHI, Nov. 20

THE stock of Mahindra and Mahindra, utility vehicle and tractor major, shot up by almost 7 per cent on value buying today on the Bombay Stock Exchange. The stock ended the day at Rs 100.65 on the BSE with 13.31 lakh shares being traded. On the NSE, the stock closed at Rs 100.80 with 26.45 lakh shares being traded. About 33.85 per cent of the traded shares were up for delivery on the NSE and 32.89 per cent on the BSE. In the F&O segment, the counter has an outstanding volume of 21.25 lakh November futures contract.

Market participants attribute the day's uptrend to sustained buying support by a foreign institutional investor. Analysts maintain that fundamentally the company looks good, hence the interest.

"If you consider the valuations of M&M, MBT and Mahindra Finance put together, it works out to an EPS of Rs 15-16, implying a PE of 7/8 thereby placing the share price close to Rs 120. Hence from these levels we could be looking at a further upside of around 20 per cent," an analyst from a leading broking house said.

The company is said to have witnessed an increase in its market share following the success of its UV model, Scorpio. M&M is also reportedly ramping up its Nasik facility (where the Scorpio is manufactured) to meet the demand.

Sources said that the company had set a sales target of 1,200 units per month, but was clocking around 1,400 units per month. "By March 2003 the company is looking at achieving a target of 2,000 units per month. There is also the talk of a new variant in the coming fiscal. The Scorpio is doing well, even though at one level it is cannibalising sales of Bolero," an analyst explained.

Even as the market is rife with talk of a double-digit growth, the company has pegged export projections of tractors for FY03 at around 5,000-6,000 units as against 3,000 units in FY02.

However at this juncture, analysts add a note of caution. With the agricultural sector expected to slow down in the current fiscal, there could be a negative impact on both tractor and utility vehicle demand in FY04.

"But given the temperamental fluctuations in weather, the scenario could also see a complete turnaround by the said year," market sources said. Currently, the company is said to be reducing its high inventory pile-up.

There is also the talk of the company downscaling its manufacturing facility in Kandivili and moving to Nagpur and other satellite cities in order to cut costs.

"Such reports and the good numbers projected by the company have served as a shot in the arm to the stock," a leading broker said.

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