Mahindra & Mahindra (M&M), one of India’s leading automotive and tractor manufacturers, is positioned to deliver significant growth, driven by its evolving electric vehicle (EV) portfolio, leadership in the tractor industry, and ambitious expansion into farm machinery. Sharekhan has reiterated a "BUY" recommendation with a target price of Rs 3,600, citing robust traction across multiple business lines, strong rural market potential, and promising EV strategies. The company’s focus on innovation, operational efficiency, and sustainability underpins its long-term growth outlook.

Expanding Electric Vehicle Offerings

Key Launches: INGLO Platform and New BEVs
M&M has unveiled its INGLO platform, serving as the foundation for its electric vehicle models, BE.6e and XEV.9e. These BEVs feature:

Battery Variants: 59 kWh and 79 kWh options for extended range.
Fast Charging: Achieves 20-80% charge in under 20 minutes.
Advanced Features: Includes Level 2+ ADAS, Dolby Atmos-enabled Harman Kardon sound systems, and auto-park features.
Warranty: Lifetime battery warranty for first-time private owners.
The BE.6e and XEV.9e are competitively priced at Rs 18.9 lakh and Rs 21.9 lakh, respectively. The company plans to scale production to 90,000 units annually, with capacity enhancements expected. Seven BEVs are slated for launch by 2030, targeting both domestic and international right-hand-drive markets.

Strong Momentum in the Tractor Segment

Market Leadership and Growth Outlook
M&M continues to dominate the tractor industry, commanding a market share of nearly 40%. The company anticipates a 6-8% growth in the tractor segment for FY2025, bolstered by:

Healthy Monsoon Patterns: Rising reservoir levels and strong farmer cash flows.
Government Support: Higher Minimum Support Prices (MSPs) and agricultural reforms.
Seasonal Demand: Chaitra Navratri in March-end 2025 is expected to boost sales.
Additionally, the farm machinery business has significant untapped potential. M&M aims to achieve 10x growth in this segment by FY2027.

Passenger Vehicles: Outperforming the Industry

Expanding Capacity and Portfolio
M&M’s passenger vehicle (PV) division has demonstrated resilience, reporting a 20.9% growth YTD November 2024, compared to 2.6% growth by Maruti Suzuki and a 2.6% decline by Tata Motors. Key factors driving this growth include:

Increased manufacturing capacity to 54,000 units/month, with plans to expand further.
Successful launches of SUVs such as Thar, Scorpio, and Bolero, which continue to enjoy strong bookings despite long waiting periods.
While the urban segment faces challenges, the rural market provides a solid growth cushion.

Financial Performance and Valuation

Consistent Profitability and Returns
M&M has consistently maintained its AEBITDA margin above 14% over the last two quarters. For FY2025-27, key projections include:

Revenue Growth: From Rs 1,17,872 crore (FY25E) to Rs 1,47,539 crore (FY27E).
AEBITDA Margin: Stable at 14.2%.
EPS Growth: From Rs 102 (FY25E) to Rs 125 (FY27E).
The stock trades at a P/E multiple of 25.7x FY26E, with a target price of Rs 3,600, reflecting a significant upside potential.

Strategic Investments in EVs

Focused Capital Allocation
M&M plans to invest Rs 12,000 crore in its EV business through its subsidiary, Mahindra Electric Automobile Limited (MEAL). British International Investment (BII) and Temasek, key investors in MEAL, have already contributed Rs 1,200 crore and Rs 300 crore, respectively. The company’s total auto business investment is expected to reach Rs 27,000 crore between FY2025-27.

Risks to Outlook

Monsoon Dependency: Uneven rainfall could impact tractor sales.
Raw Material Costs: Volatility in input prices may affect margins.
Launch Delays: Unsuccessful or delayed product launches could hinder growth.

Investment Rationale

M&M’s diversified portfolio, encompassing EVs, tractors, and passenger vehicles, positions it as a compelling long-term investment. The company’s focus on sustainability, innovation, and operational efficiency ensures a robust growth trajectory. With a revised target price of Rs 3,600, M&M remains an attractive pick for investors looking to capitalize on India’s growing auto and agricultural markets.

Financial Overview

Bottomline

M&M’s strategic focus on EVs, coupled with its stronghold in tractors and expanding PV portfolio, underscores its robust growth potential. With favorable rural dynamics and continued innovation, the company is well-poised to deliver value for its shareholders. Investors are encouraged to leverage this opportunity, keeping the revised target price of Rs 3,600 in mind.