Buy Mahindra and Mahindra; target of Rs 3891: LKP Research

LKP Research's research report on Mahindra and Mahindra

M&M’s net revenues increased by 20.8% yoy, driven by (1) 17.3% yoy increase in volumes and (2) 3% yoy increase in ASPs. M&M’s standalone Q3 FY25 EBITDA of ₹44.7 bn (+42% yoy and 13% qoq), was above street estimates due to lower-than-expected other expenses and benign RM basket. EBITDA margin came in at 14.6% (+30 bps yoy and 180 bps qoq). The company reported stellar margin performance for both Auto (9.7%) and FES (18.1%). Other expenses as a % of sales came in at 6.7% v/s 7.3% qoq and yoy, while RM as a % of sales was slightly up qoq, and declined by about 100 bps yoy. Adj. PAT grew by 24% yoy , while declined 22% qoq on lower other income sequentially.

Outlook

Retain BUY with a target price of ₹3,891. (The standalone business is value stands at ₹3,432 @23x FY27E earnings , while the subsidiaries are valued at ₹459).

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