Mahindra & Mahindra, Tesla: UBS upgrades M&M stock to buy, shares up 4%

Shares of Mahindra & Mahindra Ltd (M&M) climbed 4 per cent in Wednesday's trade after the foreign brokerage UBS upgraded the stock to 'Buy', saying the 19 per cent share price correction over the last month against Nifty Auto's 13 per cent fall on back of EV-related news flow is an overreaction. The foreign broker noted domestic SUVs account for 50 per cent of M&M's Ebitda and, thus, believes the risk-reward has turned favourable on the counter.

"Amid concerns of industry slowdown (2 per cent growth), we expect M&M volumes to grow 9 per cent in FY26 led by strong demand for its SUVs and launch of EVs. The 30,000 bookings number for recently launched EVs, though below ours and street estimates, is still strong given EV volumes in January 2025/2024 in India stood at 12,000/98,000 units," UBS said.

The domestic brokerage expects more product intervention in SUVs from M&M in FY26. It also felt that farm equipment (FES), which accounts for 40 per cent/30 per cent of EBIT/ SoTP, is seeing robust demand with no imminent threat of technology or regulatory disruptions.

Tesla vs M&M
UBS said it sees limited impact from Tesla's potential entry into India as the Model 3 (highest selling model in the US), currently priced at $35,000 (Rs 31 lakh), is likely not well-suited to the Indian market due to its low ground clearance (138mm) and sedan form factor.

Tesla's Model Y, which is the relevant model for the Indian market, is expected to have a landing price of Rs 50-60 lakh with 15 per cent customs duty against XEV 9e top-end variant's landed price of Rs 33 lakh.

"Tesla's Model Y pricing pits it against EVs such as Kia EV6, BYD Seal and Hyundai Ioniq 5, which together clock volumes less than 200 units/month. Our Tesla analyst Joseph Spak believes Tesla's India foray could be limited to imports in the near to medium term (see report for detailed call highlights)," UBS said.

"We upgrade M&M to Buy, with revised PT of Rs 3,300 against Rs 3,460 earlier. We continue to value M&M autos business at 15 times 12-month forward EV/Ebitda, a 17 per cent discount to our implied EV/Ebitda multiple for Maruti at our target price. We factor BEV sales volumes of 42,000/ 50,000 in FY26/ FY27E into our estimates, which leads to higher ASP but consequent
margin dilution and lower PAT/ price target," it said.