On Friday, Investec (LON:INVP) raised the price target for shares of Mahindra & Mahindra (NS:MAHM) Ltd (MM:IN) (OTC: MAHMF) to INR3,470.00, up from the previous INR3,460.00, while reaffirming a Buy rating on the stock. The adjustment follows a report of another strong quarter for the company, with significant performance in its major businesses.
The automotive segment, which constitutes approximately 65% of Mahindra & Mahindra's Earnings Before Interest and Taxes (EBIT), saw a robust 37% year-over-year increase in EBIT. This growth was attributed to an 18% year-over-year surge in Sport Utility Vehicle (SUV) volumes and an expansion of EBIT margin by around 140 basis points to 9.5%.
The company's farm segment, accounting for about 35% of EBIT, also delivered strong results with a 20% year-over-year EBIT growth, driven by a 4% increase in volume and approximately 150 basis points expansion in EBIT margin to 17.5%.
Management's commentary highlighted a positive outlook, with expectations to sustain strong volume momentum in the automotive sector. This optimism is supported by the ramp-up of new products, including the XUV3XO and Thar Roxx, as well as an increase in rural demand. However, a slight moderation in urban demand was noted for the industry as a whole.
From April to October 2024, Mahindra & Mahindra's SUV volume grew by 22%, outperforming competitors Maruti Suzuki India (NS:MRTI) Limited (MSIL) and Tata Motors (NYSE:TTM) (TAMO), which reported growth of 1.5% and a decline of 4%, respectively. The company has also announced plans to launch two new electric vehicles (EVs), the BE 6e and XEV 9e, on November 26, 2024.
Additionally, management has revised its forecast for tractor industry growth, raising expectations from 5% year-over-year to a range of 6-6.8% for the fiscal year 2025. Factors such as a strong monsoon season, increased Minimum Support Prices (MSPs), and heightened government spending are anticipated to drive tractor demand. Mahindra & Mahindra has been identified as Investec's 'Q alpha idea' and remains their top pick in the automotive sector.
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