Shares of Mahindra & Mahindra, part of the Mahindra Group, rallied up to 6 percent in Monday's trade and was also the top Sensex performer after M&M's March quarter (Q4FY23) operating performance was in line, though profit after tax (PAT) exceeded analysts' expectations on higher other income and lower tax. The auto major posted a 22 percent year-on-year (YoY) rise in standalone net profit to Rs 1,549 crore, while revenue jumped 31 percent. The company also announced a dividend of Rs 16.25 per equity share.

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At 11:30 am, the script was trading 3.58 percent higher at Rs 1,327.70 apiece. The stock opened over 2 percent higher at Rs 1,321.50 and soon rose up to 6 percent to Rs 1,350 level. M&M shares hit their 52-week high of Rs 1,396 on BSE on February 16, 2023, but witnessed some profit booking thereafter. The stock has gained 33 percent in the past one year, while on a year-to-date basis it jumped 5 percent.

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M&M should benefit, given growing customer preference for SUV, capacity ramp-up to fulfill strong order book, market share gains in the tractor industry, strong response to EV portfolio, according to a research note by analysts at Prabhudas Lilladher.

Management expects to further gain market share

The management expects to further gain market share helped by a new lightweight tractor launch. It also noted that commodity costs have softened and should support margins, but noted that semiconductor shortage continues to impact volumes, analysts said.

M&M incurred a capex of Rs 3,440 crore in FY23. It has increased capex (ex investments) guidance by Rs 2,720 crore over FY22-24E (including EVs) to

Rs 16,100 crore. Increase in capex has been for the auto division for capacity expansion and regulatory changes, and EVs.

Analysts have retained their bullish view on the M&M counter. Macquarie has an 'Outperform' stance on the stock, while Goldman Sachs, Motilal Oswal, Nuvama, and Prabhudas Lilladher have taken a 'Buy' view.

Here's what brokerages recommend on the counter:

Goldman Sachs has a 'Buy' recommendation on the stock for a target price of Rs 1,530 per share. The March quarter results were in-line with the estimates. It said that the El Nino impact is less concerning for the auto business. M&M is also outgrowing its peers.

Macquarie maintains an 'Outperform' rating on the stock with a price target of Rs 1,536. The fourth quarter saw a marginal beat for core earnings led by better margins and a solid PV order book and resilient tractor demand drive our constructive outlook, the brokerage stated.

Motilal Oswal maintains a 'Buy' rating with a target price of Rs 1,500 per share. While the outlook for tractors remains stable, the brokerage expects the auto business to be the key growth driver for the next couple of years.

Nuvama maintains a ‘Buy’ with an increased target price of Rs 1,470 from earlier Rs 1,430. Considering the hefty order book and increase in production capacity, we are raising FY24E and FY25E EPS by 8 percent each. Following the revision, we expect revenue/core earnings CAGR of 12 percent/14 percent over FY23–25E; this would lift post-tax RoIC to 30 percent-plus.

Prabhudas Lilladher has a 'Buy' rating on the stock, with a target price of Rs 1,585. M&M's Q4FY23 revenue came above our and consensus estimate. However, EBITDA margin at 12.4 percent came below our estimate of 12.8 percent, due to higher mix of auto segment and impact from farm machinery in FES segment.

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ICICI Securities retained 'Buy' rating on the counter, tracking robust response to new launches in the SUV space with resultant order backlog of 2.9+ lakh units and consequent increase in capacity in phased manner, focus on market share gains in tractor domain with series of new launches, amid persistent focus on capital efficiency.

First Published:May 29, 2023 12:19 PM IST