M&M Shares Gain As Analysts Bet On EV Launch, Sales Growth Across Segments

Mahindra & Mahindra Ltd. was among the top Nifty 50 gainers as analysts hiked price targets for the automaker citing aggressive launching of electric vehicles and sales growth across segments.

The stock gained nearly 3% on Monday, the most in two weeks, and over 7% in the last four days.

On Thursday, the automaker executed a binding agreement to sell stake in its new electric vehicle arm to British International Investment. They together will invest Rs 3,850 crore—equally split between them—in the new firm.

British International will invest through compulsory convertible instruments, which, upon conversion, will give it a 2.75-4.76% ownership in the EV company. The electric SUV platform will be unveiled on Aug. 15, 2022, and the first EV product will be sold from Q1 2023.

Also, late last month, the company launched the all-new Scorpio-N SUV in five variants, with prices starting from Rs 11.99 lakh (ex-showroom). Analysts had then said it might aid market share and trigger rerating.

Of the 46 analysts tracking M&M, 41 maintain a 'buy', three suggest a 'hold' and two recommend a 'sell', according to Bloomberg data. The 2-month consensus target price implies an upside of 5.4%.

The stock's trading volume was similar to the 30-day average. The Relative Strength Index is 73, suggesting it may be 'overbought'.

Here's brokerages have to say about M&M's growth prospects.

Kotak Institutional Equities

• Maintains 'buy', raises target to Rs 1,400 from Rs 1,180—an implied return of 20.32%.

• Expects the newly formed subsidiary to invest in aggressively launching EV products and leverage the existing ecosystem of the company.

• Electrification in passenger vehicles can accelerate due to favourable policies from the government, evolution of EV infrastructure and accessible pricing.

• Increases FY23-25 standalone EPS estimates by 9-12% on higher volume assumptions, Ebitda margin assumptions.

• Expects the company to make significant strides in electric SUV space.

Emkay Global

• Maintains 'buy', hikes target to Rs 1,390 from Rs 1,250—an implied return of 22.62%.

• Remains positive on the company due to sales upcycle across segments and large order book in PVs (1,70,000 units).

• Adds Rs 233 apiece for the EV subsidiary to arrive at the new target price.

• The aspirational sales target for five new products to be unveiled by the EV company will be 2,00,000 units, accounting for 30% of EVs share by FY27.

Nirmal Bang

• Downgrades stock to 'accumulate' from 'buy', but raises target to Rs 1,217 from Rs 1,184—an implied return of 7.36%.

• The success of the EV arm will depend on sourcing of battery and development of requisite manufacturing capacity to meet demand.

• The investment from British International will provide clarity on the upfront capex requirement for the new arm.

• The valuation of Rs 70,000 crore for the proposed EV arm to be 'too good to be true'.