3M India - Strong Investments In New Product Development: ICICI Securities

ICICI Securities Report

Following a review of 3M India Ltd.’s FY24 annual report, our conviction on the company’s performance and potential remains strong. We note:

1. A marked rise in new product development. Also, with 3M’s customer industries (automotive/infrastructure etc.) growing at a healthy rate, the company too has stepped-up innovation.

2. The Chairman and Managing Director’s letter focuses on investments in infrastructure and the evolving automotive landscape – summarily 3M is likely to be a net beneficiary.

3. Working capital days is steadily shrinking – reduced to 22 in FY24, from 63 in FY20 (FY23: 33 days). Accordingly, FCF generation is stronger.

4. While Ebitda margin expansion is healthy, it is near FY11–24’s peak levels.

Our optimism on 3M India is bolstered by its established competitive edge and long-term growth potential. With the stock price correcting ~15% over the past three months, we upgrade our rating to Buy, from Add.

We value the stock at a DCF-based unchanged target price of Rs 41,960 (implying 62 times FY26E earnings per share).

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