Global brokerage HSBC has assigned a ‘buy’ rating on Mahindra & Mahindra Ltd stock and raised their target price to Rs 1,800, implying a potential upside of 15 percent from the current market levels.

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HSBC mentioned that the tractor business of the homegrown automaker has surprised positively so far this year even as underlying monsoon trends are not encouraging.

Also, the brokerage expects some downside risks to tractor business growth in FY25, continued traction in the SUV business would well compensate for those risks, HSBC said in its note.

The SUV production of Mahindra and Mahindra has now reached 36,000-38,000 units per month and it is now at par with the order intake run-rate, the brokerage mentioned.

“Stock is trading at 16.3x FY25e core EPS,” it said.

Mahindra and Mahindra had reported total sales of 67,927 units of utility, cars, electric and three-wheelers in the domestic market for August 2023 compared to 56,127 units in the year-ago period. Exports were down at 2,423 units in the last month as against 2,912 units in the year-ago period

The automaker’s farm equipment sector (FES) reported a 3 percent growth in tractor sales at 20,647 units in the domestic market in the last month against 20,138 units during August 2022.

The company had noted that despite a 9 percent monsoon deficit at end of August, Kharif sowing is largely on track and has shown an improvement over last year for all key crops except pulses.

Mahindra and Mahindra shares were trading 1.4 percent lower at Rs 1,535.80 apiece on BSE at 10.46 AM.