Mahindra & Mahindra (M&M) performance for the quarter was ahead of our expectations with superior profitability. Revenue increased by 19% to Rs54bn on a volume growth of 21%. Operating profits adjusted for government grant and VRS expenses at Rs8.5bn were ahead of our estimates of Rs8.1bn. Adjusted operating margins expanded by 80bps sequentially to15.8%. Adjusted PAT at Rs7.3bn is in line with our estimates.

Outlook: We expect tractor volumes to grow by 10% in FY11 with upward bias. Automotive segment volumes are likely to be 20% higher during FY11. On better profitability, we have upward revised our standalone earnings for FY11 and FY12 by 4% each to Rs41.3 and Rs45.5 respectively.

VALUATIONS AND RECOMMENDATION The stock is currently trading at 17.7x and 16.1x FY11E and FY12E standalone earnings respectively. We reiterate our 'BUY' rating on the stock with a revised target price of Rs840 (earlier Rs831) based on the Sum of the Parts (SOTP) valuation.