Mahindra & Mahindra Ltd. is Jefferies' favoured pick over Maruti Suzuki India Ltd., due to its stronger growth potential in the SUV and tractor markets. The brokerage has a 'buy' rating on M&M, with a target price of Rs 3,700 per share, seeing a 23% upside from current levels.
Apart from better growth potential, Jefferies expects M&M to have better margin sustainability and higher expected earnings growth. But despite better prospects, M&M stock trades at near similar valuations to Maruti Suzuki, the brokerage noted.
It has a 'hold' rating on Maruti Suzuki, with a target price of Rs 10,900, implying a downside of 2%.
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Tractors And SUVs To Outperform Cars
Jefferies sees strong demand for M&M products and said the company benefits from robust demand in the SUV and tractor segments, with the tractor industry projected to grow at a 5% CAGR and SUVs outperforming cars in the passenger vehicle segment. Mahindra demonstrates better margin stability than Maruti, indicating stronger resilience and consistent financial performance, it said.
The Scorpio-maker also has a favourable industry positioning and is poised to outperform due to positive industry trends and a strong franchise, Jefferies said.
A key risk for Maruti is the challenge of meeting 2027 CAFE norms while maintaining profitability, according to the brokerage.
Another key aspect has been market share. M&M has been gaining share in SUVs and tractors, while Maruti is losing share in passenger vehicles.
While M&M has the upper hand, valuations for the company at 23 times FY26 price-to-earning ratio is comparable to Maruti at 21 times.
Jefferies expects 19% EPS CAGR between FY24-27 for M&M. In comparison, Maruti is expected to have a 10% EPS CAGR over FY24-27.
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