IIFL InstitutionalEquities, a part of the IIFL Group, one of the leading players in the Indianfinancial services space, recommends “Buy ”  Mahindra & Mahindra.

According to IIFLreport, - Mahindra & Mahindra’s (M&M) 1Q earnings came in 10%ahead of our estimates due to strong sequential margin improvement (margin haddeclined sequentially in five of the past six quarters).

Revenue grew 39% YoY (3% above estimate) led by 18%volume growth and a greater proportion of high-value UV volumes. The 40bp QoQ improvement in gross margin(in line with estimates), combined with a sharp reduction in operatingexpenses, drove Ebitda margin expansion of 150bp QoQ (80bp higher thanestimates). Of this, about 40-50bp was due to the impact of the MADPL merger in the base quarter (4QFY12), report stated

Margins of the auto segment expanded 170bp QoQwhereas those of the farm equipment segment remained flat.Combined margins of M&M and MVML (Chakan plant subsidiary) improved 180bp QoQ.

"We increase our EPS estimates for FY13 by 10% and forFY14 by 6%, primarily underpinned by higher margin estimates. We increase ourTP from Rs800 to Rs865 due to increase in EPS estimates and because we rollover our TP from Sept 2013 to FY14," brokerage added.

The report was publishedby IIFL’s Institutional Equities Research desk.