Buy Mahindra and Mahindra; target of Rs 1617: HDFC Securities

HDFC Securities' research report on Mahindra and Mahindra

M&M Q4 adjusted PAT at INR 19.3bn came in above our estimate of INR 16.2bn due to higher-than-expected revenue and lower tax rate, even as its operational performance was in line with our estimates. M&M’s performance highlights for FY23 are: (1) No. 1 in SUVs revenue market share at 19.1% (+370bps YoY); (2) market leader in LCVs (<3.5T) with 520bps improvement to 45.5%; (3) FES market share up 120bps YoY to 41.2%; (4) market leader in EV 3Ws with 67.6% share. Also, it is commendable that M&M has already achieved most of the targets it earmarked a couple of years back, including improvement in auto margins, EPS CAGR, RoE at 18% (stands at 19.9% for FY23), calibrated asset allocation, etc. We continue to remain positive on the business momentum, given: (1) a strong order backlog for UVs will help further gain market share; (2) the target to further increase its market share in tractors on the back of new launches; (3) focused strides taken to achieve a strong position in EVs; (4) continuing focus on careful capital allocation; (5) challenge set for growth gems to grow 5x.

Outlook

Maintain BUY, with a revised TP of INR1,617/sh (earlier at INR1,554/share) as we roll forward to FY25 EPS.