M&M - Well Poised To Outperform Across All Its Verticals: Motilal Oswal

Motilal Oswal Report

We have categorised Mahindra and Mahindra Ltd.’s core businesses into three buckets: tractor, pickup utility vehicle, and passenger UV. All of these businesses witnessed a sharp growth in their underlying industries, resulting in record-high volumes in FY23.

While the industry dynamics remained favorable for M&M, its focus on-

1. new model launches,

2. healthy margin expansion in the core business, and

3. prudent capital allocation resulted in an earnings compound annual growth rate of ~11% over FY19-23.

This coupled with expected launches in the EV category led a substantial re-rating. As a result, M&M has outperformed the Nifty index significantly over the last two years with ~44% CAGR vis-a-vis 12% for the Nifty.

While we believe that growth should moderate in some of its verticals, M&M is still better placed to outperform the underlying segments, which would result in ~12.5%/15%/17% revenue/Ebitda/profit after tax CAGR over FY23-26E.

The implied core price/earning for M&M stands at 18.1 times/16.4 times FY24E/FY25E earnings per share, which remains attractive versus peers.

Hence, we reiterate our 'Buy' rating with a target price of Rs 2,005 based on Dec-25E SOTP and Rs 214/share for its e-passenger vehicle subsidiary.

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