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Updated January 3rd, 2024 at 10:37 IST

Mahindra & Mahindra set for robust growth across verticals, including EVs: Motilal Oswal

The focus on new model launches, healthy margin expansion, & prudent capital allocation has resulted in an impressive earnings CAGR of about 11% from FY19-23.

Tanmay Tiwary
Mahindra Auto sells 35,171 SUVs, a 24% growth and total volumes of 60,188 in December 2023
Mahindra and Mahindra set for robust growth | Image:Mahindra
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Mahindra & Mahindra in focus: Mahindra & Mahindra (M&M) is set to outperform in its core businesses, categorising them into Tractor, Pickup UV, and Passenger UV segments. The company has witnessed notable growth in these sectors, achieving record-high volumes in FY23. 

The focus on new model launches, healthy margin expansion, and prudent capital allocation has resulted in an impressive earnings compound annual growth rate (CAGR) of approximately 11 per cent from FY19-23, according to brokerage firm Motilal Oswal.

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Despite expectations of moderated growth in some verticals, M&M is predicted to outperform underlying segments, projecting CAGRs of around 12.5 per cent, 15 per cent, and 17 per cent for revenue, EBITDA, and PAT respectively over FY23-26E. The company's strategic initiatives and expected launches in the Electric Vehicle (EV) category have contributed to a notable re-rating, leading to major outperformance against the Nifty index, the brokerage firm noted.

Here is why is Motilal bullish on M&M:

Positive Outlook in Passenger UV Segment

The domestic Passenger Vehicle (PV) volumes are anticipated to report a 6-7 per cent CAGR over FY23-26E. Notably, the reorientation of M&M's SUV business has led to a revival, resulting in robust demand momentum and a strong order backlog. The company is expected to achieve approximately 14 per cent volume CAGR for its Passenger SUV segment over FY23-26E.

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Market Leadership in LCV Segment

While the domestic Light Commercial Vehicle (LCV) industry may see modest growth, M&M is strategically positioned to outperform, holding a market share of approximately 62.5 per cent in the 2.0-3.5T LCV category. This market leadership is expected to contribute to M&M's strength in the LCV segment.

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Optimistic Tractor Industry Outlook for FY25

FY24 presented challenges for the tractor industry, including lower crop production. However, with healthier reservoir levels and favorable festive timings expected in FY25, the tractor industry is predicted to experience a positive growth trajectory. M&M's tractor volumes are estimated to report a approximately 3 per cent CAGR over FY23-26.

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Strategic Investments in EV Subsidiaries

M&M's foray into the Electric Vehicle (EV) space includes a binding agreement with Temasek for a notable investment in Mahindra Electric Automotive Limited (MEAL). This strategic move aligns with M&M's broader strategy to attract investors and aims to achieve 20-30 per cent of SUV sales from EVs by 2030.

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Motilal Oswal has a “buy” rating for M&M with a target price of Rs 2,005 based on December 2025 Estimated Sum of the Parts (SOTP), along with an incremental value of Rs 214/share for its EV subsidiary.

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Published January 3rd, 2024 at 10:06 IST

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