Not cruising anymore? JM Financial downgrades M&M shares to 'Hold' from 'Buy'

JM Financial, in its recent report, has downgraded its rating on Mahindra & Mahindra (M&M) Ltd shares to 'Hold' from 'Buy' previously as the domestic brokerage believes that the carmaker is "not in cruise mode anymore" and is finally facing the heat of consumer slowdown.

"Our recent channel checks indicate a softening of demand in the PV segment, with increasing consumer offers and price reductions across models (excluding Thar Roxx) signalling a weak demand environment. Additionally, bookings for its recently launched electric SUVs were underwhelming as compared to M&M’' standard, and with the launch cycle being over now, volume growth is likely to remain under pressure. On the margins front, M&M faces headwinds across both the auto and farm segments," JM stated.

The broking firm has assigned a downward target price of Rs 2,640 for M&M shares, suggesting a 3.54 per cent drop compared to Tuesday's closing level of Rs 2,736.80. "M&M has outperformed Nifty over the last 12 months and current valuations leave no room for growth. Our checks indicate there is a risk to this optimism. We downgrade our rating to HOLD with a Mar'27 TP of Rs 2,640 (SOTP valuation, 22x core business)," it added.

'Weakening demand'

"Our recent channel checks indicate a softening of demand in the PV segment, with most dealers highlighting a decline in customer walk-ins/inquiries. In the case of M&M, basis our channel checks, consumer offers and price reductions are being extended across models, barring Thar Roxx, indicating a weakening demand environment. Additionally, bookings for M&M's recently launched electric origin SUVs (XEV 9e and BE 6) were underwhelming as compared to M&M's standard," JM said.

"Further, the launch is cycle behind us and refreshes being some time away, we see a risk to M&M's volume estimates, given the weakening demand and lacklustre EV bookings," the domestic brokerage also said.

M&M's margins to come under pressure?

JM mentioned that M&M's margins are expected to come under pressure from rising RM (raw material) prices, compounded by a 12 per cent safeguard duty proposed by the Directorate General of Trade Remedies (DGTR) on imports of non-alloy and alloy steel flat products. Increasing input costs make it difficult to pass the inflationary pressure to customers and the company has already increased discounts in Mar'25, it also noted.

Further, the brokerage highlighted that margin headwinds from rising RM prices and EV launches are likely to be a further drag on profitability, resulting in EBITDA margin at 13.7 per cent/13.8 per cent (down 100bps/110bps) for FY26E/FY27E.