In early Friday trading, shares of Mahindra & Mahindra (M&M) jumped up to 7.7%, hitting a fresh 52-week high of Rs 2,554.75. The company's performance in the March quarter surpassed market expectations, which led numerous analysts to boost their target prices and improve their ratings. This led to the robust rise.
M&M demonstrated 11% year-over-year (YoY) sales growth and consistent quarter-over-quarter (QoQ) margins at 12.9% in its Q4FY24 results. Due to cost optimization and favorable raw material costs, the Farm Equipment Sector (FES) margins climbed to 15.8% (+60 bp YoY) despite lower volumes, while the car segment's margins improved by 170 basis points (bp) YoY to 8.8%.
Optimistic outlook for M&M shares
International stockbroker Jefferies boosted its target price for M&M to Rs 2,910 and upgraded the stock to a "buy" recommendation.
The company raised its projections for FY25–26 earnings per share (EPS) by 16–21%, noting the stability of M&M's tractor division, which is reaching the end of its decline, and the strength of its SUV portfolio. According to Jefferies, M&M's values are still 20% below that of its peers, even with the current increase.
Morgan Stanley raised its target price to Rs 2,665 while Goldman Sachs set a goal of Rs 2,700. M&M's robust performance and promising expansion were recognized by both companies. Kotak Equities analysts are still bullish on M&M's prospects because of the company's superior return ratios, good execution in every business sector, and preparedness for the switch to electric vehicles (EVs).
Kotak has established a target price of â¹2,550 and increased its FY2025-26 EPS expectations by 12–14%. The strong demand for M&M utility vehicles (UVs), which is being driven by new releases and a sizable order backlog, was noted by Motilal Oswal analysts.
In addition, they see a rebound in tractor sales after a base adjustment in FY24. The company forecasted a compound annual growth rate (CAGR) of 17% for sales, 20% for EBITDA, and 16% for PAT over the course of FY24–26. It also increased its EPS predictions by 6% and 11% for FY25 and FY26, respectively.
With M&M achieving an 18% return on equity (RoE) in FY24 and raising its capex projection to Rs 370 billion for FY25–27, Motilal Oswal set a target price of Rs 2,720. Nuvama also boosted the target price from Rs 2,380 to Rs 2,760 and raised its FY25 and FY26 EPS projections by 8% and 13%, respectively.
Strong auto segment revenue visibility, bolstered by a sizable UV order book of 220,000 units and a robust launch pipeline for FY25 that includes the Thar five-door and dedicated platform EVs, were highlighted by the company.
In addition, Nuvama anticipates that the agriculture sector would rebound due to favorable monsoon projections, governmental initiatives, and advantageous trading conditions for farmers. However, CLSA reduced M&M from a "outperform" recommendation to a "sell," citing the stock's current fair price in light of its recent advances.
The price of M&M shares as of 12:33 pm was Rs 2,526.05, a rise of 6.46%.
