Accumulate Mahindra and Mahindra; target of Rs 1391: Arihant Capital

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26 Aug, 2025 12:21

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M&M has reported largely in-line with our estimates in Q1FY23, Standalone revenue stood at INR 196,126 Mn, against our estimate of INR 197,560 Mn registering a growth 14.5% QoQ/ 66.7% YoY. This was driven by traction across both the segments, autos and tractor. Farm Equipment Sector (FES) Tractors Market Share for Q1 FY23 at 42.7%, uptick of 0.9% YoY and continues to be No.1 in SUV Revenue Market Share of 17.1%. Farm Equipment second highest ever Q1 PBIT at INR. 10,740 Mn. • EBITDA improved led by better product mix: EBITDA stood at INR 23,410 Mn, against our estimate of INR 23,650 Mn, Registering a growth of 20.3%QoQ/43.5%YoY.Improvement in margins supported by better mix and operating leverage, despite higher RM cost. On the margins front, EBITDA margin contraction by 2bps QoQ/-70bps YoY to 11.9%, against our estimate of 12%. (In Q1FY22 13.9%). However, we believe competitive pricing pressure in FES segment would limit the margin expansion going forward.

Considering, recent shoot up in the stock price prompt us to downgrade the stock from Buy to Accumulate with a revised SOTP based target price of INR 1,391 per share (earlier target price; INR 1,274 per share).