On Friday, Investec increased its price target for Mahindra & Mahindra Ltd (MM:IN) (OTC: MAHMF) to INR2,550 from INR2,200, while sustaining a Buy rating on the stock. The revision follows the company's operational performance, which surpassed the firm's forecasts, attributed to higher-than-expected revenues and margins.
Mahindra & Mahindra reported a robust Auto EBIT margin of 8.8%, marking an improvement of 170 basis points compared to the previous year. The Farm segment also showed resilience with a margin of 15.8%, despite a slight decrease of 60 basis points year-over-year and a decline in volume. The management anticipates the positive trend in the automotive sector will persist, fueled by upcoming product launches and a strong order book, which is approximately five times the average monthly volumes.
The company is poised for growth, with expectations of double-digit volume growth in the fiscal year 2025. To support this, Mahindra & Mahindra is expanding its automotive production capacity by about 50%, aiming to reach around 72,000 units per month by the end of fiscal year 2026, up from the current capacity of approximately 49,000 units per month. This expansion includes an increase in electric vehicle (EV) production to about 18,000 units per month.
Looking at the farm equipment sector, the company projects a positive outlook with anticipated growth of over 5% year-over-year in fiscal year 2025. Additionally, Mahindra & Mahindra's EV strategy is advancing, with plans to launch seven battery electric vehicles (BEVs) by 2030. The company's transition strategy includes both born electric vehicles and conversions from internal combustion engines (ICE (NYSE:ICE)) to EVs.
Investec's endorsement of Mahindra & Mahindra as a top pick in the Original Equipment Manufacturer (OEM) space remains firm. The Buy rating is reiterated based on the company's strong operational performance and promising growth prospects in both the automotive and farm segments.
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