Auto Stock Showing Upside Potential, Trading 3.67% Down From 52 Week High, Buy, Says Nirmal Bang

Nirmal Bang has a 'Buy' on Mahindra & Mahindra Ltd. (M&M) for a target price of Rs. 1,593 crore. The stock is showing an upside potential of up to 17% considering the given target price and the current market price of the stock. The stock has performed decent in the past 5 years, giving positive returns.

M&M is India's one of the leading Automobile sector companies with a presence across 2-wheelers, 3-wheelers, PVs, CVs, tractors & earthmovers. It is a large-cap suto sector company with a market capitalisation of Rs. 1,70,444 crore.

Focus on scaling up the core businesses

Nirmal Bang said, "We recently hosted the management of Mahindra and Mahindra Ltd (M&M), represented by Mr. Sandesh Naik - General Manager of Corporate Finance & Investor Relations as part of the two-day NBIE investor conference. The management highlighted the steps taken by the company in the last few years towards value creation. M&M has exited several loss-making ventures and has successfully turned around others. Initially, the management had targeted EPS growth of 15-20% and ROE of 18% for FY23. It ended up achieving remarkable revenue growth of 34% in FY23, exceeding its guided range of 15- 20%."

It added, "Over the past two years, M&M has also expanded its market share in farm segment by 3%. Furthermore, its Farm Machinery segment clocked strong growth of 38% in FY23. The company holds a dominant market position in the SUV and LCV segments, with market share of 19% and 45%, respectively. In the EV segment, the company has started delivering XUV400; commercial production for its XUV.e will commence from Dec'24 and the BEV range will come to the market by April'25-end. In the ICE segment, the company has no plans for new launches, but will focus on expanding production capacity and reducing existing order backlogs. Looking ahead, the management sees significant growth opportunities in the Farm Machinery segment as well, with an expected growth rate of 40%. It also plans to expand its international business by 1.6 times by FY26-end. We estimate 12% CAGR in revenue over FY23-FY25."

It added further, "We value M&M on SOTP basis, with the core business valued at ~16.5x FY25E core EPS (revised from 16x to 16.5x owing to strong order book and robust demand outlook). Other listed Mahindra group entities are valued at the current market value to arrive at a target price (TP) of Rs1,593. We maintain BUY on M&M."

Stock Performance

On Friday, the stock ended at Rs. 1,370.65 apiece, down 0.75% from its previous close. It is currently trading 3.67% down from its 52 week high. Its 52 week high is Rs. 1,422.80 apiece recorded on 7 June 2023, while, the 52 week low is Rs. 972.65 apiece recorded on 22 June 2022.

It surged 2.18% in the past 1 week and 10.05% in the past 1 month, respectively. It gave 31.15% positive return in 1 year. In 3 years, it gave 186.3% positive return, while 50.35% in the past 5 years.

Disclaimer - The stock has been picked from the brokerage report of Nirmal Bang. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.