Buy Mahindra and Mahindra; target of Rs 1150: Motilal Oswal

Motilal Oswal's research report on Mahindra and Mahindra

The beat in MM's 2QFY22 performance was driven by better mix in the Auto business, cost-saving initiatives, and higher other income. Growth in Tractors is slowing, particularly on a high base of FY21. However, the Auto segment is expected to see strong momentum in both SUVs (led by new products and the easing of supply issues) and LCVs (cyclical recovery) We increase our FY22E/FY23E EPS estimate by 9%/8% to factor in stronger than expected XUV700 response as well as an improving LCV cycle. We maintain our Buy rating, with a TP of INR1,150/share (Sep'23E SoTP).

Outlook

Implied core P/E for MM stands at 12.3x/9.6x FY22E/FY23E EPS. This implies an over 30% discount (on an FY23E basis) to its five-year average core P/E. We maintain our Buy rating, with a TP of INR1,150/share (Sep'23E SoTP).