M&M - Multiple Growth Levers In Key Business Segments: Motilal Oswal

Motilal Oswal Report

Over the past three-four years, Mahindra and Mahindra Ltd. has not only demonstrated strong performance improvement in its key segments but has also prioritized prudent capital allocation practices. We expect M&M to continue to focus on prudent capital allocation going forward as well.

Further, we raise our FY25E/26E earnings by 7% each to factor in the healthy response to its new model launches in automotive segment and initial signs of tractor demand revival for FY25. We estimate MM to clock a revenue / Ebitda /profit after tax compound annual growth rate of ~18%/20%/20% over FY24-26.

We now value the tractor/auto businesses at 22 times /20 times June-26E EPS (from 20 times/18 times earlier). Its re-rating drivers include:

1. strong demand momentum in utility vehicles,

2. healthy long term growth opportunity in tractors,

3. solid progress within growth gems which would emerge as future value unlocking drivers,

4. continued prudent capital allocation with a clear focus on returns.

Reiterate Buy with a revised target price of Rs 3,310 (based on June-26E SOTP).

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