Mahindra and Mahindra Ltd (M&M) shares have climbed around 20 per cent in the last six months. The stock was last seen trading 0.13 per cent lower at Rs 1,538.35 today. Nuvama Institutional Equities has assigned a 'Buy' call on the counter with a target price of Rs 1,850, suggesting a potential upside of Rs 20.26 per cent.
"The company's Q2 FY24 revenue/EBITDA rose 16 per cent/23 per cent YoY to Rs 24,310 crore/Rs 3,070 crore, slightly below estimate. EBITDA miss was mainly due to launch costs. Going forward, we expect a 13 per cent revenue CAGR over FY23–26E driven by robust/moderate growth in the auto/farm segment. Pending UV order book is large at 286,000 units," the brokerage stated.
"Better net pricing and scale in the auto segment shall boost profitability, driving a core earnings CAGR of 16 per cent over FY23–26E; this would sustain RoIC at 35 per cent-plus. Stock catalysts include production ramp-up and incremental announcements pertaining to EVs. Retain 'BUY' with an SoTP-based TP of Rs 1,850 on Sep-25E," Nuvama added.
"The PV order book is strong at 286,000 units led by Scorpio, XUV700 and Thar. Furthermore, production capacity is being raised from 42,000 units a month presently to 49,000 units by Mar24E. EVs are a key focus—plans afoot to launch five E-PVs over Dec-24 to Oct-26," the brokerage further said.
Nuvama also expected that the tractor industry is likely to recover in FY25E on increased government support to farmers ahead of the elections, better agri-credit availability and strong non-agri demand.
The brokerage also cited that the company's management believes that M&M Financial Services Ltd is on path to recovery, but Tech Mahindra Ltd is likely to see a gradual turnaround over the next three years.
Another brokerage PhillipCapital has also given a 'Buy' call on M&M with a target price of Rs 1,681. "Strong demand for the company's UV portfolio continues, while management works on getting the supply right to fulfil orders for the higher end versions, which should further aid margins," it stated.
On BSE, around 20,000 shares changed hands today at the time of writing this story. The figure was lower than the two-week average volume of 1.01 lakh shares. Turnover on the counter came at Rs 3.06 crore, commanding a market capitalisation (m-cap) of Rs 1,91,565.62 crore.
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