On Friday, Goldman Sachs (NYSE:GS) updated its outlook on Mahindra & Mahindra Ltd (MM:IN) (OTC: MAHMF) shares, raising the price target to INR2,700 from INR2,160. The firm maintained a Buy rating on the stock, following the company's fourth-quarter performance, which surpassed expectations.
Mahindra & Mahindra reported a stronger-than-anticipated fourth quarter in both its core Auto and Farm sectors. The company's revenues and EBITDA in these segments increased by 5% and 9%, respectively, exceeding Goldman Sachs estimates.
This was attributed to better-than-expected Farm Equipment margins and a favorable product mix, particularly with the Scorpio and Scorpio-N vehicles.
The company's standalone revenue and EBITDA also showed positive trends, with a 6% and 13% increase over Bloomberg consensus estimates, and a 5% and 1% rise over Goldman Sachs expectations, respectively. The XUV3XO model has garnered significant interest, amassing over 50,000 bookings since its launch, indicating a waiting period of around six months.
Looking forward, Mahindra & Mahindra anticipates a 5% growth in tractor volumes for the fiscal year 2025, a rebound from the 6% year-over-year decline in FY24. The upcoming fiscal year benefits from two Navratra seasons, which are traditionally strong for tractor sales, compared to only one in the previous year. Additionally, the company plans to expand its annual car manufacturing capacity by 30% in FY25 and 13% in FY26.
Mahindra & Mahindra's management expressed confidence in maintaining its margin trajectory into FY25. Goldman Sachs' positive stance on the stock is based on the company's potential for faster volume growth and better demand visibility, especially in the SUV segment. The firm also noted that Mahindra & Mahindra's stock is relatively more affordable compared to its peers in both the Passenger Vehicle and Tractor sectors.
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