Buy Mahindra and Mahindra; target of Rs 1727: LKP Research

LKP Research is bullish on Mahindra and Mahindra has recommended buy rating on the stock with a target price of Rs 1727 in its research report dated August 07, 2023.

Broker Research

August 09, 2023 / 13:48 IST

Buy

26 Aug, 2025 12:21

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LKP Research's research report on Mahindra and Mahindra

M&M reported decent Q1 FY24 numbers wherein the topline was reported at ₹240 bn, a growth of 22.7% yoy and 6.6% qoq. Volumes rose by 10% yoy and realizations went up by about 11.2% yoy. Automotive division revenues came in at ₹166 bn, an increase of 21% yoy led by success of new launches –Thar, Bolero Neo, XUV 7oo, Scorpio variants and XUV 3oo & 4oo. M&M started rapidly catering to the order backlog as chip shortage issue softened. Automotive segment reported strong EBIT margins, which rose by 40 bps qoq, (180 bps yoy) to 7.5% due to positive operating leverage, stable commodity basket and model mix. Tractor margins came in strong at 17.5% which were 40 bps up qoq and 150 bps up yoy. Overall EBITDA margins therefore came in at 13.4% (100 bps jump qoq and 150 bps yoy). Coupled with higher other income, PAT came in 89% up yoy and 11.5% qoq at ₹27.4 bn.

Outlook

We maintain BUY on attractive valuations; SoTP-based target price stands at ₹1,727 (₹1,382 core business valued at 12x FY25E earnings + subsidiary valuation of ₹345) in line with our assumptions of margin improvement on increase in volumes and value of SUV, 3Ws and LCV segments, decent growth in FES, production increase offering operating leverage, price hikes and prudent cost reduction measures.

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