Anand Rathi initiates coverage on M&M with a 'buy' rating; check target price

Anand Rathi Shares & Stock Brokers has initiated coverage and expressed confidence in Mahindra & Mahindra (M&M), with expectations for a 9% CAGR in volumes from FY25 to FY27. This growth is anticipated to be propelled by 12% in passenger vehicles (PVs), 6% in tractors, 6% in commercial vehicles (CVs), and a notable 15% increase in exports. Realisation growth is expected to reach 8%, attributed to a higher share of electric vehicle (EV) models, with a mix of 8% and 12% projected for FY26 and FY27, respectively.

The brokerage forecasts a robust revenue and EBIT CAGR of 18% and 17%, respectively, over FY25-27, with profit after tax (PAT) and core PAT growth of 19% and 21% for standalone plus Mahindra Electric Automobile Limited (MEAL). Anand Rathi has initiated a 'Buy' rating on M&M with a sum-of-parts target price of Rs 3,600, based on 26 times FY27 core EPS for standalone plus MEAL.

M&M plans to introduce seven internal combustion engine (ICE) SUVs, five battery electric vehicles (BEVs), and five light commercial vehicles (LCVs) by FY30. Specific plans for 2026 include one 7-seater ICE SUV, two ICE SUV upgrades, two BEVs, one ICE LCV, and one EV LCV. This strategy emphasises the company's focus on innovation and differentiated features to maintain competitiveness.

Mahindra Electric Automobile (MEAL) is poised to play a crucial role in M&M's growth, with expected volumes of 50,000 units in FY26 and 80,000 units in FY27. MEAL is projected to account for 8% and 12% of M&M's PV volumes and 17% and 22% of PV revenue in FY26 and FY27, respectively, contributing significantly to the company's growth trajectory.

Anand Rathi has highlighted slower-than-expected domestic industry volume trends, increased competition, and adverse commodity prices or forex rates as key risks. The firm also cites Escorts and Maruti as its preferred picks, followed by M&M, when considering the risk-return trade-off.

M&M's strategic initiatives, alongside its projected growth in diverse vehicle segments, underscore its potential to capture significant market share. The company's focus on EVs and a balanced mix of ICE and BEVs aligns with global trends towards sustainable mobility, positioning it well for future challenges.