Bank of America Merrill Lynch has downgraded Indian utility vehicle and tractor maker Mahindra & Mahindra (M&M) to 'underperform' from 'neutral', saying it expects slower earnings growth.
We expect core business volumes to disappoint and profit to decelerate sharply, leading to street downgrades. Our FY13E EPS translates to low single profit growth and 9 per cent below street, justifying non-consensus rating, the Wall Street bank said in a note on Tuesday.
It also cut its target price to 645 rupees from 815 rupees. The shares closed at 674 rupees on Monday.
The bank said it expects tractor demand to be flat over the next two years due to tapering of rural incomes, slower economic activity and declining agricultural credit.