On Friday, Citi maintained its Buy rating on Mahindra & Mahindra (NS:MAHM) Ltd. (MM:IN) (OTC: MAHMF) stock but reduced the share price target to INR3,520 from INR3,590. This revision follows the company's second-quarter financial results for fiscal year 2025, which exceeded expectations, driven by strong performance in both the farm equipment and automotive segments.
The company experienced robust retail volume growth during the festive season, prompting a positive demand outlook. Management has updated its FY25 tractor industry volume guidance to a 6-7% year-over-year increase, up from the previous 5% projection. Additionally, in the utility vehicle (UV) segment, recent pricing strategies have boosted volumes while preserving profit margins.
Despite the positive developments, Citi noted potential short-term margin pressures linked to the launch of battery electric vehicles (BEVs). Nevertheless, the firm has raised its revenue and EBITDA forecasts for Mahindra & Mahindra. However, due to increased capital costs and a reduction in Other Income, Citi has slightly lowered its earnings estimates by 0-2% for the fiscal years 2025-2027.
The Sum-of-the-Parts (SOTP) based target price adjustment to INR3,520 from INR3,590 also factors in the latest share prices of Mahindra & Mahindra's listed subsidiaries. The analyst's commentary indicates a recalibration of the financial outlook for the company, taking into account both the positive sales trends and the financial adjustments anticipated in the coming years.
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