Buy Mahindra and Mahindra; target of Rs 1250: Emkay Global Financial

Emkay Global Financial's report on Mahindra and Mahindra

We attended the unveiling ceremony of Scorpio-N, which is targeted at upmarket urban customers. This model is superior to existing Scorpio Classic in terms of power and ridehandling, and sports an all-new design with comprehensive safety/connectivity features. Scorpio-N is developed with an investment of Rs16bn and has a production capacity of 6,000 units per month. It would compete with models like Tata Safari, Toyota Innova, Hyundai Alcazar, etc. Similar to XUV700, it will be launched at a competitive price, which will be applicable to the first 25,000 units. MM’s order book stands at ~170,000 units, and the Scorpio-N launch on July 30 will further support bookings. Considering expectations of a staggered improvement in chip supplies and a large order book, we raise volume estimates by ~3% each for FY23 and FY24. We increase our FY23/FY24 EPS estimates by 6% due to an increase in margin assumptions.

Outlook

We have a Buy rating with a TP of Rs1,250 (Rs1,150 earlier), based on 16x core Jun’24E EPS (DCF-based) and the value of investments at Rs482/share. We increase the valuation multiple to 16x from 14x, factoring in higher revenue growth and margin assumptions in our DCF model.

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