Mahindra & Mahindra (M&M), a leading automobile manufacturer, saw its shares surge by 78% over the last year. However, in the June 2024 quarter, the company didn’t meet expectations due to lower average sales prices, even though its vehicle and farm equipment segments saw steady growth. While its revenue increased by 12%, the profit after tax (PAT) dropped by 5.3% compared to last year. Both revenue and profit missed analysts’ estimates by 5.8% and 8.3%, respectively.
Despite this, M&M’s operating performance was strong, thanks to lower raw material costs and better product mix. Its standalone EBITDA grew by 22% year-on-year, exceeding analysts’ predictions by 5.1%.
M&M offers a diverse range of products, including SUVs, trucks, electric vehicles, and tractors. The company uses advanced technologies like artificial intelligence and machine learning to improve its manufacturing processes.
Looking forward, M&M is expected to benefit from strong growth in both its automobile and farm equipment sectors. Factors such as strong economic growth, government focus on infrastructure, rising income levels, urbanization, and a young population are driving the automobile market. The management aims for a 15-19% growth in utility vehicle sales for 2024-25, driven by new models like the XUV 3XO and the new Thar. By 2030, the company plans to launch 23 new products, including electric and light commercial vehicles, and expects electric vehicles to make up 20-30% of its sales within the next five years.
In the farm equipment segment, demand for farm machinery is expected to rise due to increased farm mechanization, new technologies, and government efforts to improve agriculture. Favorable market prices for farmers, a positive monsoon forecast, and the upcoming festive season are also likely to boost tractor sales in the near term. The company has set a growth target of 5% for the tractor segment in 2024-25.
M&M is also expanding internationally by introducing its OJA tractors in Europe and ASEAN markets. It is focusing on growing its farm machinery business through investments in technology and strategic partnerships.
A recent report by Motilal Oswal suggests that M&M is committed to achieving 15-20% earnings per share (EPS) growth and an 18% return on equity (ROE), ensuring long-term profitability and value for shareholders. The stock has outperformed both the broader market and the automotive sector, with the BSE Sensex and BSE Auto Index gaining 25.8% and 66.6%, respectively, in comparison.
The stock was selected based on its significant improvement in analyst ratings over the past three months. A higher analyst rating indicates growing confidence in the stock’s future performance. Only stocks covered by more than five analysts were considered. You can find similar stocks with improved analyst ratings in the ETW 50 table.
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