M&M Q2 Results Review: Most Brokerages Positive After Q2 Results, Await Thar Roxx Launch

Mahindra & Mahindra Ltd. has received positive commentary from brokerages after it reported strong set of numbers in the quarter ended September, on the back of higher SUV sales.

On a consolidated basis, the Scorpio maker's revenue came in at Rs 37,924 crore and net profit was Rs 3,361 crore. Analysts polled by Bloomberg had estimated the top line at Rs 27,063 crore and the bottom line at Rs 3,564 crore.

A Morgan Stanley report citing management said that the company is seeing some stress in urban areas, but festive season for all original equipment makers has gone well and rural segment is showing a turnaround. "Rural recovery is driving some improvement in LCVs (large commercial vehicles) and the company has revised tractor growth guidance upward," it said while remaining 'overweight' on the stock.

The brokerage also said that its electric vehicle Thar Roxx's launch on Nov. 26 will be key to watch as it has over 1.5 lakh order backlog.

Morgan Stanley has slightly raised its target price on the stock to Rs 3,336 per share from Rs 3,304 earlier, implying 15.4% upside.

Nomura has also upwardly revised its target price to Rs 3,664 from Rs 3,417 per share, implying 27% upside. It said that the stock is its top OEM pick in the sector.

"Despite weak industry demand, MM continues to deliver strong growth driven by a string of successful SUV launches," the brokerage said.

"Management strategy to reduce prices of higher-end XUV700 variants deserves a special mention as it has re-invigorated growth without any impact on overall ASPs (average selling prices) or margins."

Meanwhile, Citi Research, Nirmal Bang, and Nuvama have maintained their 'buy' call on M&M, as they see multiple prospects of growth.

Going forward, Nuvama expects the auto segment's annual revenue growth at 16% over FY24–27, led by strong demand for key models such as Thar, XUV3XO and Scorpio and a healthy launch pipeline.

"We also expect a strong recovery in farm segment with 11% revenue CAGR due to normal monsoons, benign government policies for farmers, market share gains and robust exports," it said.

New products such as Oja, Target, and Naya Swaraj are strengthening the product range, and shall support market share gains in the domestic and overseas markets, Nuvama said.

The brokerage has a target price of Rs 3,700 apiece, implying a 27.6% upside.

Citi Research has, however, lowered its target price slightly to Rs 3,520 per share from Rs 3,590 apiece, implying 13% upside. While it has increased its revenue and Ebitda estimates, higher capital costs and some tempering down of other income has brought minor cuts to its earnings estimates.

According to brokerage, festive season demand was strong for utility vehicles and tractors and UV retails were much higher than billings, supported by new models 3XO and Thar Roxx.

In addition, it said rural demand has been stronger than urban demand and for tractors, underlying demand drivers for agri income have been positive. The brokerage also likes that management increased the tractor industry's FY25 volume growth guidance to 6- 7% YoY from 5% earlier, with volume growth guidance for second half of the year at 13-15 %YoY.

Nirmal Bang has a target price of Rs 3,388 per share, implying 16.8% upside. It sees multiple levers of growth including cyclical recovery in tractor industry, passenger vehicle portfolio, and strong capex plans to support positive demand prospects across segments.

In contrast, Emkay has downgraded the stock to 'reduce' rating, as the brokerage said the best of SUV launch cycle is now behind.

"Though we see M&M outperforming near term, we expect a muted 4% PV growth in FY25E-27E, amid persistent industry challenges and as best of the SUV launch-cycle is now behind," Emkay said.

The brokerage has also lowered its target price by 10% to Rs 2,700 per share, implying 7% downside.

In the passenger vehicle segment, it prefers Maruti Suzuki India Ltd., given the upcoming SUV launch and small-car optionality, while Escorts is its preferred pick in tractors.