Mahindra & Mahindra - Initiating Coverage - Megastar on Roll: IDBI Capital

BQ Blue's special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..We initiate coverage on M&M and expect stock to offer 77% return over the next two years led by strong earnings growth and PE expansion supported by 1) Huge impetuous by Managements on Growth and Value creation 2) Strong recovery in Auto business 3) Blistering earnings cycle, 31% PAT CAGR over FY22-24E 4) Value unlocking in EV and other business and 5) Simplifying group structure with tight capital allocation, exiting/reorganizing loss making business. In our valuations methodology, we have valued M&M’s Auto and Farm business separately as both businesses have different dynamics. We have also captured valuations of its EV business, Growth Gems (upcoming businesses) and M&M’s investments in digital platforms.¾ Blistering Earnings Cycle: M&M’s earnings cycle which has been stalled since FY14 is likely to enter into blistering phase with 20% Sales CAGR and 31% PAT CAGR over FY22-24E. We expect MM’s earnings growth to be primarily led by its Auto business which is likely to contribute 60% to its FY24E EBITDA compared to 36% in FY21.n Management’s Focus on Growth and Value Creation: M&M plans to launch 63 products over the next 3-4 years as Management has clearly laid out accelerated growth path. Management focus on unlocking shareholders value through simplifying business structure, capital allocation policy and reorganizing business is highly conducive for PE rerating.¾ BUY with 77% upside: Based on Standalone earnings, the stock is quoting at PER of 13xFY24 earnings despite 34% earnings CAGR and ~17% ROE profile. However based on its core business (Auto and Farm), net of subsidiary valuations of Rs 605/share, the stock is quoting at PER of 5.2xFY24 earnings..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BloombergQuint.Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Mahindra & Mahindra - Initiating Coverage - Megastar on Roll: IDBI Capital

Mahindra & Mahindra - Initiating Coverage - Megastar on Roll: IDBI Capital

NDTV Profit

NDTV Profit

Follow Us

DOWNLOAD THE APP