The upcoming Mahindra & Mahindra Ltd.'s multi-purpose vehicle launch due this financial year-end could boost growth for the automaker if designed well and priced right, according to a report by brokerage house CLSA.
The broking firm also expects a pick-up in the rural economy to benefit the Anand Mahindra-led company.
The government has accelerated rural spend in the past two years and aims to double farm incomes by 2022. Its rural focus should sharpen over the next 12-18 months as elections are due in first half of 2019 (H1CY19). M&M should be a key beneficiary, given its high exposure to the rural economy.CLSA Research Report
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Commenting on the commercial vehicles and tractor segment, CLSA said that the automobile manufacturer's volume growth is on an uptrend, led by strong demand in tractors and a cyclical recovery in light commercial vehicles.
Besides, the SUV business has been a drag but even its volumes are recovering on a low base, it said.
Also Read: Non-Farm Income Driving Rural Demand, Says Mahindra's Jejurikar
The volumes and earnings per share are likely to grow at a compounded annual growth rate of 11 percent and 13 percent, respectively over FY17-20.
CLSA has upgraded M&M's stock rating to ‘Buy' from ‘Outperform' and hiked its target price to Rs 1,610 from Rs 1,585, a potential upside of 25 percent from Wednesday's closing level.
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