Hot stock alert! Buy Mahindra & Mahindra shares now, say experts, Ssangyong and Detroit links are big reasons why

One of the largest passenger carmakers in India, Mahindra & Mahindra (M&M) share price has become an eye-catcher on Dalal Street. Experts at Edelweiss Securities have given a buy rating with a target price of Rs 732 per piece in short term, which creates a potential of upside by 17.47% if compared with current market price. 

Chirag Shah and Jay Mehta, Research Analyst at Edelweiss Securities said, “The Street’s key concern is uncertainty in M&M’s diesel UV portfolio post BSVI transition. We believe, the company is adequately equipped to ensure a smooth transition (refer note). Decision to discontinue cost prohibitive models including the old Thar, Bolero and TUV100, should help sharpen focus on the more successful models. Also, introduction of gasoline engines across products will enable M&M to address white spaces. We expect a series of new launches from M&M over the next three years combining the strength of Ssangyong and the Detroit tech centre.”

On tractors segment, the duo said, “M&M’s ~250bps market share loss to 40.3% in FY19 was due to management’s focus on managing inventory and focusing on profitable market share. The recent slowdown in tractors is due to delay in monsoon, weak rabi season and a general slowdown in the rural economy. Hence, a recovery in demand is dependent on revival of these factors.”

Thus, the analysts estimate core EPS CAGR of -3% over FY19-21 and maintain ‘BUY/SO’ with SOTPbased TP of INR732 (13x September 2020E core EPS, INR81 cash per share, INR256 for listed subsidiaries). At CMP, the stock trades at FY20/21E PER of 16.3x/14.1x .

During Tuesday's trading session, M&M share price finished at Rs 623.10 per piece down by Rs 8.55 or 1.35%. The stock touched an intraday high and low of Rs 627.90 per piece and Rs 619 per piece respectively.