Mahindra & Mahindra Q1 review: Analysts give a thumbs up to June quarter nos; stock likely to rise up to 20%

Mahindra & Mahindra Q1 results: Mahindra & Mahindra (M&M) shares gained as much as 3.4 per cent to Rs 1,515 apiece on the BSE on Monday. The company, on Friday, released its June quarter numbers, wherein the auto major reported a consolidated net profit of Rs 3,508 crore, up 60 per cent year-on-year (YoY) against Rs 2,196 crore logged in the year-ago period. Consolidated revenue for the quarter under review came in at Rs 33,892 crore, up 19 per cent YoY. READ MORE

In a separate announcement, the company announced that its board has approved the merger of its wholly-owned subsidiaries, Mahindra Heavy Engines Limited (MHEL), Mahindra Two Wheelers Limited (MTWL), and Trringo.com Limited (TCL), with the company.

Commenting on the company's June quarter results, Prabhudas Lilladher said that M&M should benefit from growing customer preference for SUVs, ramp-up in production to fulfil strong demand and order book, market share gains in the tractor industry from new segments, and ramp-up in the EV portfolio starting 2025.

"Also, the benign raw material (RM), operating leverage, and end of a volume of introductory priced model would benefit margins (we built a c160bps expansion over FY23–25E). Retain ‘BUY’ with TP of Rs 1,760 (18x on Mar-25E core EPS and Rs 360 for subsidiaries) vs Rs. 1,685 earlier," the brokerage said in its Q1 review note.

Analysts at Motilal Oswal Financial Services said that while the outlook for tractors remains stable, they expect the auto business to be the key growth driver for the next couple of years. "Despite the deterioration in the mix, we estimate a revenue/EBITDA/PAT CAGR of ~14%/20%/20% over FY23–25. The implied core P/E for MM stands at 15.6x/14.1x FY24E/FY25E EPS," the brokerage added.

It further said that while the valuation is still attractive as compared to peers, M&M has seen a substantial rerating in FY23 as the stock is now trading in line with its five-year average core P/E (against a discount of 30% earlier). The re-rating has been on the back of a strong performance in the SUV segment, market share gains in tractors, and a new launch pipeline for EVs.

The brokerage has maintained its buy rating on the stock with a target price of Rs 1,725 (based on Sep’25E SOTP).

Despite delivering a strong return on equity (RoE) of 24 per cent, M&M maintains its threshold at 18 per cent RoE and would look to balance growth and profitability, notes ICICI Securities.

The brokerage has maintained a 'BUY' rating on the stock with a revised target of Rs 1,686 (earlier: Rs 1,543).