Buy Mahindra and Mahindra; target of Rs 2005: Motilal Oswal

Motilal Oswal's research report on Mahindra and Mahindra

We have categorized Mahindra and Mahindra (MM)’s core businesses into three buckets: Tractor, Pickup UV, and Passenger UV. All of these businesses witnessed a sharp growth in their underlying industries, resulting in record-high volumes in FY23. While the industry dynamics remained favorable for MM, its focus on- i) new model launches, ii) healthy margin expansion in the core business, and iii) prudent capital allocation resulted in an earnings CAGR of ~11% over FY19-23. This coupled with expected launches in the EV category led a substantial re-rating. As a result, MM has outperformed the Nifty index significantly over the last two years with ~44% CAGR visà-vis 12% for the Nifty. While we believe that growth should moderate in some of its verticals, MM is still better placed to outperform the underlying segments, which would result in ~12.5%/15%/17% revenue/EBITDA/ PAT CAGR over FY23-26E.

Outlook

The implied core P/E for MM stands at 18.1x/16.4x FY24E/FY25E EPS, which remains attractive vs. peers. Hence, we reiterate our BUY rating with a TP of INR2,005 based on Dec’25E SOTP and INR214/share for its ePV subsidiary.