Brokerages have maintained a positive outlook on Mahindra & Mahindra (M&M) despite the recent price cut on the XUV 700. Both Morgan Stanley and Investec see the price reduction as a strategic move that is unlikely to have a significant negative impact on the company’s long-term performance.
Investec has maintained its 'Buy' rating on M&M with a target price of Rs 3,100 and Morgan Stanley has retained its 'Overweight' call with a target price of Rs 3,049.
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Following M&M's decision to slash prices on its best-selling SUV, the XUV 700, amid low demand, shares of M&M fell over six percent on July 10. On July 11, the stock fell as much as 0.8 percent to Rs 2,711, extending the losses of the previous session.
The firm’s decision to cut the price on the AX7 range by Rs 2 lakh brings the starting price down to Rs 19.49 lakh from Rs 21.4 lakh.
Investec views the price cut as a strategic tweak aimed at broadening the Total Addressable Market (TAM) and preparing for a mid-cycle refresh of the product. Investec said that the price reduction likely aims to clear existing inventory to make way for the refreshed model. Additionally, M&M has increased its manufacturing capacity for the XUV 700 in line with its demand forecasts.
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Morgan Stanley said in a note that the announced price cuts will have a limited impact on the company's Earnings Per Share (EPS). The brokerage highlights several positive catalysts for M&M, including the upcoming launch of the Thar 5-door variant, strong UV volumes, and a potential recovery in tractor sales in the second half of the fiscal year. Despite the risks associated with a slowdown in the electric vehicle (EV) segment and hybrid duty cuts, Morgan Stanley believes M&M will continue to be the fastest-growing passenger vehicle Original Equipment Manufacturer (OEM) in FY25.
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