Capacity additions, and a robust order book are expected to drive faster growth for Mahindra and Mahindra (M&M) this year compared to the overall passenger vehicle industry, according to Abhishek Gaoshinde, Deputy VP of Research at Sharekhan by BNP Paribas.
Shares of M&M have shown impressive performance over the past year, emerging as an outperformer in both the Nifty and Nifty Auto Index.
The company's stock price has close to doubled over the past year, reaching nearly ₹2,700 apiece, prompting investors to question whether all the good news is already reflected in the current prices or if there's more growth ahead.
Gaoshinde believes that while many positives have already been factored in, changes in M&M's automotive business suggest there may still be upside potential.
"Previously, M&M's performance relied on its tractor segment. However, recent shifts have placed the automotive segment in the driver’s seat, contributing a larger share to the company’s EBITDA (earnings before interest, tax, depreciation, and amortisation)," he noted.
While a slowdown in the tractor cycle was anticipated, the automotive division's increased capacity and robust order book have driven growth.
With an order book of roughly 270,000 units, Gaoshinde believes M&M can outperform the PV segment, which is expected to grow by 5-6% in FY25.
M&M's strong pan-India presence in the tractor market, supported by its in-house financing arm, also provides it a competitive edge.
Despite a slight market share loss in the last quarter, Gaoshinde is confident that M&M will recover in FY25, maintaining sustainable EBITDA margins.
Brokerage house BofA Securities also recently upgraded the M&M stock to 'buy' from 'neutral' and raised the target price to ₹3,050. The revised price target implies a potential upside of 14% from current levels.
The company's consolidated Earnings Per Share (EPS) could grow at a Compounded Annual Growth Rate (CAGR) of 18% with Return on Equity (RoE) target of 20%, per BofA estimates.
Out of the 40 analysts that have coverage on Mahindra & Mahindra, 35 have a "buy" recommendation, four have a "hold" and only one has a "sell" rating on the stock.
Also Read | Maruti Suzuki chief RC Bhargava shares auto industry's biggest concern post Lok Sabha election results
Shares of M&M have shown impressive performance over the past year, emerging as an outperformer in both the Nifty and Nifty Auto Index.
The company's stock price has close to doubled over the past year, reaching nearly ₹2,700 apiece, prompting investors to question whether all the good news is already reflected in the current prices or if there's more growth ahead.
Gaoshinde believes that while many positives have already been factored in, changes in M&M's automotive business suggest there may still be upside potential.
"Previously, M&M's performance relied on its tractor segment. However, recent shifts have placed the automotive segment in the driver’s seat, contributing a larger share to the company’s EBITDA (earnings before interest, tax, depreciation, and amortisation)," he noted.
While a slowdown in the tractor cycle was anticipated, the automotive division's increased capacity and robust order book have driven growth.
With an order book of roughly 270,000 units, Gaoshinde believes M&M can outperform the PV segment, which is expected to grow by 5-6% in FY25.
M&M's strong pan-India presence in the tractor market, supported by its in-house financing arm, also provides it a competitive edge.
Despite a slight market share loss in the last quarter, Gaoshinde is confident that M&M will recover in FY25, maintaining sustainable EBITDA margins.
Brokerage house BofA Securities also recently upgraded the M&M stock to 'buy' from 'neutral' and raised the target price to ₹3,050. The revised price target implies a potential upside of 14% from current levels.
The company's consolidated Earnings Per Share (EPS) could grow at a Compounded Annual Growth Rate (CAGR) of 18% with Return on Equity (RoE) target of 20%, per BofA estimates.
Out of the 40 analysts that have coverage on Mahindra & Mahindra, 35 have a "buy" recommendation, four have a "hold" and only one has a "sell" rating on the stock.
Also Read | Maruti Suzuki chief RC Bhargava shares auto industry's biggest concern post Lok Sabha election results
(Edited by : Shweta Mungre)
First Published: Jun 6, 2024 12:00 PM IST
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