M&M analysis: Automaker Mahindra & Mahindra (M&M) reported a healthy set of numbers in the third quarter of fiscal year 2024 (Q3FY24) with an earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 12.8 per cent, a marginal increase compared to the previous quarter and a slight decline year-over-year. The company reported robust demand for utility vehicles (UVs), with particular attention on the tractor cycle as a key factor to monitor, analysts noted.

In the automotive sector, M&M saw a positive trend with supply constraints largely alleviated. The Mumbai-based company is gradually increasing sports utility vehicle (SUV) capacity and has witnessed strong demand, reflected in outstanding bookings exceeding 226,000 units. With higher operating leverage and favourable commodity costs, M&M expects its margins to remain resilient, brokerage firm JM Financial said in a note.

M&M anticipates sustained growth in SUV sales, particularly in the premium segment, and is on track with its development of electric vehicle (EV) models under the 'Born Electric' initiative.

Meanwhile, in the farm equipment segment, the company faced challenges due to a shortfall in monsoon rains affecting demand in certain regions. Despite this, the company reported improvements in tractor market share, supported by new launches and network expansion.

M&M is mainly focused on reducing inventory levels over the next few months and remains cautiously optimistic about the tractor market's revival, contingent upon factors like normal monsoons and favourable terms of trade, brokerage firm highlighted.

M&M reported a 17 per cent year-on-year (YoY) increase in net sales, with EBITDA standing at Rs 3,240 crore, slightly exceeding analyst estimates. While the tractor segment experienced a slight decline in volume, the automotive segment showed resilience, especially in SUV sales.

M&M maintains a positive outlook for FY25, with a focus on capitalising on strong demand in the automotive sector and navigating challenges in the farm equipment segment.

Considering these factors, JM Financial analysts recommended a ‘buy’ rating for the stock with a target price of Rs 1,850 per share.

As of 11:11 am, shares of M&M were trading 4.63 per cent higher at Rs 1,734 per share.