Mahindra & Mahindra share: M&M growth to piggyback on SUVs, but will long waiting period become an impediment? Check brokerage targets

Mahindra & Mahindra share price: Mahindra and Mahindra is expected to piggyback on its strong SUV orderbook, and company’s ambitious capacity targets will likely give this auto major a high visibility among its peers, opines Nomura. Meanwhile, Goldman Sachs which has put an even better price target on this stock, sees it outsmarting its peers on the product portfolio terms. 

While Nomura has put a price target of Rs 1616, Goldman Sachs estimated it at Rs 1640 per share. The latter sees an upside of up to Rs 350 per share or 27 per cent. The stock was recommended at a price of Rs 1287. 

M&M shares were trading at Rs 1,289.15 on the NSE and was up by Rs 2 or 0.16 per cent from the Friday closing price.  

The share price of this Rs 160,210.22 crore market cap company has corrected nearly 4 per cent over the past 4 trading sessions.  

Source:NSE

Mahindra & Mahindra Q2 Results

Nomura, in a note said that the September quarter results posted by M&M were in line with the street estimates. Margin improvements across auto tractors are on track, it said. The capacity targets give high visibility and the company is a top pick in OEM space, this brokerage further said 

The company reported its highest ever quarterly standalone and consolidated revenue. The net profit for the July-September quarter stood at Rs 2,090 crores, up 46 per cent on a standalone basis while consolidated PAT stood at Rs 2,773 crores and was up 44 per cent. The consolidated revenues stood at Rs 29,870 crore, up 39 per cent.

Meanwhile, Goldman Sachs expects its flagship brands XUV700 and Scorpio-N’s additional capacity to flow through in 2HFY24. It said that its Q2 results were in line with the estimates despite its product’s dominance in the diesel segment. 

Mahindra & Mahindra's Challenges 

The moot question here is — will the long waiting period on flagship Mahindra & Mahindra SUVs pose a big impediment towards the growth of the company? 

While acknowledging it to be a big impediment in M&M’s growth, Puneet Gupta, Director S&P Global Mobility said that it was “undoubtedly” a problem for the auto major. However, the company has been up to the task and has been working on reducing the waiting period for its vehicles.  

Mahindra & Mahindra has been pushing models with more variants and ones with lower requirements of chips or semi-conductors and people are happily buying them. The chip problem is also behind the delay in deliveries and the company is aggressively working to catch-up.   

With XUV700 and Scorpio N as its top bets, Mahindra & Mahindra is not left with many options but to expedite its production, otherwise it runs the danger of losing market share to peers like Toyota and Jeep, Gupta said.  

The company has been boosting its capacity and the results have shown over the last 3 months, Gupta said adding that its next six-month production plan also impressive.   

The waiting period for its product line varies between 4-24 months.  

Some of the other products being offered by the company include Thar, Bolero, Scorpio Classic and Marazzo.     

Mahindra & Mahindra: Recommendations from other brokerages 

-- CLSA maintains a Buy on M&M shares but has cut the price target to Rs 1539 from Rs 1567. 

-- Morgan Stanley remains ‘Overweight’ on Mahindra & Mahindra with a price target of Rs 1411.  

-- Jefferies took a contrarian view maintaining an ‘Underperform’ rating with target raised to Rs 1140 from Rs 1090. The brokerage noted headwinds in terms of slowdown in the tractor segment. 

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)