Buy Mahindra and Mahindra; target of Rs 3330: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahindra and Mahindra

M&M’s standalone revenue grew by 12% YoY in Q1FY25 driven by strong volume growth across divisions. Gross profit grew by 17.9%YoY, while margin expanded by ~140bps YoY to 26.3%, benefitting from better operating leverage and pricing actions. EBITDA grew by 22.4% YoY, while margin expanded significantly by ~126bps YoY to 14.9%. PAT de-grew by 5.3% YoY due to lower other income and rise in tax rate. The management retained its guidance to deliver mid-to-high teens volume expansion in its UVs. Similarly, it maintained tractors guidance of 5% for FY25; if rainfall is above normal this year, growth could exceed 5%. We remain bullish on M&M due to the 1) healthy volume growth from its compact UV model, 2) new model pipeline, with increased offerings at multiple price points, 3) capacity expansion to reduce waiting period and ensure timely delivery of products, 4) healthy order book across the portfolio, and 5) above-normal monsoon could lead to incremental volume in the tractors. We marginally change our estimates by 1-3% for the forecast period. Factoring this, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 14.8%/25.5%/22.1% over FY24-26E.

Outlook

We retain our ‘BUY’ rating with a TP of Rs3,330 (previous Rs3,250) valuing it at 25x on its FY26E core EPS and Rs229 for its EV business and Rs385 for its listed subsidiaries.