Buy Mahindra and Mahindra; target of Rs 3250: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahindra and Mahindra

We attended the annual analyst meet of M&M where the company gave a detailed overview of its Automotive and Farm business verticals as well as its subsidiary. M&M outlined a strong outlook for the Automotive and Farm divisions led by new launches. With its new launches receiving healthy response, we believe it will deliver mid-high teens growth in the UVs in FY25. The launch of OJA series tractors has been well received in the domestic as well as international markets. Further, prediction of a normal monsoon shall translate to mid-single digit growth for FY25. Additionally, the management aims to enter into new geographies strategically for UVs as well as Tractors. We continue to remain bullish on the growth prospects of M&M based on (1) its plan to increase its presence in the high growth category, (2) its aspiration to drive its market share in the <4-meter UV category, (3) its capacity expansion plans to reduce the waiting period and timely execution of new products, (4) the diversification of powertrains, (5) the recovery in tractor volume along with a strong sustainable margin, and (6) the gradual scaling of international UVs and Tractors volume. Factoring the healthy product portfolio in UVs, LCVs and Tractors space, we increase our Automotive/Tractor volume estimates by ~1-3% over FY24-FY26E. Consequently, we forecast its revenue/EBITDA/APAT to grow at a CAGR of 16.6%/24.2%/20.2% over FY24-FY26E.

Outlook

We maintain our ‘BUY’ with a TP of Rs3,250 (vs Rs2,716) valuing it at 25x on FY26E core EPS, and Rs229 for the EV business and Rs385 for listed subsidiaries.