September 2006 IIP up 11.4%
Mahindra & Mahindra
Cluster: Apple Green
Price target: Rs870
Current market price: Rs830
Extending Renault partnership
- Mahindra and Mahindra (M&M) and Renault have signed a memorandum of understanding (MoU) to set up a greenfield passenger car manufacturing plant with a total capacity of 500,000 vehicles. Nissan too may join the venture and the decision regarding the same is expected in the next four months.
- We view the development as a positive for M&M as it deepens the relationship between the two companies. M&M would also benefit from the strong technical skills and wide product portfolio of Renault.
- Nissan too is expected to join the venture and the decision regarding the same is expected to be taken in the next four months. In case Nissan decides to join the venture, the scope of the project would widen further. It would also bolster the exports of the company.
- This plant would have the capability to make the Mahindra range of products as well as the Mahindra-Renault range of products, ie the various versions of Logan. Renault has also announced plans to set up a power-train plant through a wholly-owned subsidiary in India.
- We maintain our Buy recommendation on the stock with our sum-of-parts price target of Rs870, at which it would quote at 12.9x its FY2008E consolidated earnings.
Double digit growth continues
The automobile sector continued to grow at double digits in October though the sales were affected due to high inventory build-up with the dealers and a higher number of holidays during the month that affected production. The car segment performed well with a 16.3% domestic growth, while the domestic two-wheeler sales grew at a lower rate of 9.5%. The overall automobile sales volume rose by 11.7% with the domestic and export sales rising by 10.4% and 30.1% respectively.
Sharekhan's top equity fund picks
We have identified the best equity-oriented schemes available in the market today based on the following parameters: the past performance as indicated by the returns, the Sharpe ratio and Fama (net selectivity).
The past performance is measured by the returns generated by the scheme. Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken.
FAMA measures the returns generated through selectivity, ie the returns generated because of the fund manager's ability to pick the right stocks. A higher value of net selectivity is always preferred as it reflects the stock picking ability of the fund manager.
MUTUAL FUNDS: WHAT’S IN—WHAT’S OUT
Fund Analysis: November 2006
An analysis has been undertaken on equity and mid-cap funds' portfolios, indicating the favourite picks of fund managers for the month of October 2006. Equity funds comprise of all diversified, index, sector and tax planning funds, whereas mid-cap funds include a universe of 17 funds such as Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund etc.