Jefferies suggests 'buy' on M&M, 'hold' on Maruti Suzuki; demand tailwinds seen favourable for tractor entity

Jefferies after a positive traction in the Nifty Auto pack in the past month has shown its optimism on Mahindra and Mahindra (M&M). The brokerage has reiterated its 'buy' call on the tractor entity for a target of Rs 3,700, implying gains of 23 per cent from the last close.

On the other hand, in respect of Maruti Suzuki- the country's leading automaker-the global brokerage has maintained hold with a target of Rs 10,900 apiece.

This is a downside of nearly 2 per cent from the previous close of Rs 11,081.45 apiece on the BSE.

The brokerage believes given the current market and global trend, M&M is a better investment case in comparison to Maruti Suzuki.  The brokerage is of the view that strong industry demand tailwinds will augur well for the stock.

M&M is gaining market share across tractors, SUVs and light commercial vehicles (LCVs while Maruti is slipping in PVs.

Rationale for likely gains in M&M

The brokerage stated that M&M is set to rise as the company's Q2 volume rose in high double-digits of 18 per cent year-on-year. At the time of writing this copy at around 12:48 pm, the stock was up over 2  per cent at Rs 3,078.15, while at the day's high it scaled Rs 3,148.05 apiece on the BSE.

On the other hand, companies from the space including Maruti Suzuki India, Tata Motors, and Hyundai Motor logged a decline in volume during the quarter of 2-9 per cent.

The brokerage is of the view that the tractor industry is gearing for a new upcycle and amid the momentum it anticipates an increase in volume as well as EPS by 13 per cent and 19 per cent, respectively, between FY24-27.

Also, Jefferies noted that top two original equipment manufacturers (OEMs) namely Maruti Suzuki and Hyundai India saw a sharp drag in their market shares in the first half of FY25, slumping to 12-year low, and M&M's PV market share was at a record 12.5 per cent.