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ICICI Securities
3M India (Buy)
Target: ₹26,900
CMP: ₹22,968.2
FY21 annual report highlights: Auto electrification is focus area for the company and it will introduce differentiated products in battery thermal management and display solutions; 3M also plans to work closely with OEMs, their contract manufacturers and suppliers to enable more local content; and the company introduced three products in automotive segment.
We expect launches of additional products with normalisation of economy. The company’s diverse product portfolio helped it cushion the impact caused by Covid. Its respirators, sanitisers and personal protection equipment segments did well (Ranjangaon factory was never shut down during the year) and digital learning platforms helped (3M Healthcare Academy and 3M Energy Academy) learning aspirants with self-learning courses.
We remain positive on 3M India due to competitive advantages such as strong brands, established distribution network and global relationships with large manufacturers, and access to parent’s technology pool. We model 3M India to report revenue and PAT CAGRs of 18.1 per cent and 65.2 per cent respectively over FY21-FY23 with steady improvement in RoE. We upgrade the stock to ‘Buy’ from ‘Add’.
Key risks: prolonged weakness in the economy, and failure of new products.
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