Motilal Oswal Financial Services has reiterated a resounding BUY call on Mahindra & Mahindra (M&M), projecting unwavering confidence in the company’s ability to outperform the broader market. The research house assigns a target price of Rs 3,687 for M&M, suggesting a potential upside of around 15% from the current market price. Investors are advised to capitalize on M&M’s diverse strengths, robust financials, and ambitious roadmap across the auto and farm equipment sectors.

Mahindra & Mahindra (M&M) Continues on Growth Path

Motilal Oswal’s latest research underscores M&M’s stellar execution in both its core sectors—automotive and farm equipment—with an impressive 1QFY26 performance that surpassed expectations. With earnings, margins, and growth metrics trending upwards, the brokerage maintains its BUY rating and sets a target price of Rs 3,687 per share. The report details the volume growth, margin trends, product pipeline, and strategy for electric vehicles (EVs). Management’s commitment to double-digit EPS growth, along with healthy return ratios and a packed new launch calendar, reinforce the positive outlook for investors seeking long-term value.

Resilient Q1 Performance: Clocking Robust Growth

1. M&M’s 1QFY26 results showcased a robust earnings beat, driven by higher-than-estimated other income, with PAT soaring to Rs 34.4 billion—far ahead of the Rs 30.7 billion estimate. Despite macroeconomic headwinds, consolidated sales jumped 26% year-over-year to Rs 341 billion. EBITDA margins were steady at 14.3%. While the farm equipment segment (FES) margin surged by 140 bps to 19.8%, the auto division delivered stable margins amid temporary EV contract manufacturing dilution. The tractor business continued to shine, with healthy profitability and higher market share.

Management’s Assertive Targets

2. Management reaffirms its commitment to delivering 15-20% EPS growth and maintaining ROE at 18%. The company has consistently outperformed its internal targets, cementing sustained shareholder value and robust capital efficiency. The focus remains on solid top-line growth, rigorous cost control, and strategic investments in R&D and market expansion.

Market Share Leadership: Auto and FES Outperformance

3. M&M continues to capture market share, with its auto revenue market share climbing 570 bps to 27.3% and leadership in the light commercial vehicle (LCV) less than 3.5T category. The company reinforced dominance in the tractor segment, with its share inching up 50 bps to 45.2%. E-SUV penetration at 7.8% (versus 5.6% for the industry) demonstrates M&M’s first-mover advantage in green mobility. Strategic new launches, like the XUV 3XO, find favor domestically and in international markets such as South Africa and Australia.

Financial Highlights: Momentum Across the Board

4. Fiscal forecasts point to a compelling growth trajectory for FY25–FY27, with top-line, EBITDA, and PAT CAGR of 15%, 14%, and 18% respectively. Analysts expect volumes to hit 1.42 million units in FY26 and 1.54 million units in FY27, with net sales rising from Rs 1,165 billion in FY25 to Rs 1,537 billion in FY27. Margins are projected to remain resilient, and cash flow generation is healthy, providing ample headroom for further capex and innovation.

EV Strategy: Charting a Distinct Path

5. M&M’s vision for EVs is materializing at pace, with ambitious plans to launch seven BEVs by 2030, including two in 2026, backed by a partnership with Volkswagen for key components. The company expects EVs to generate 20–30% of volumes in five years, supported by planned investments of Rs 120 billion. Early launches have already garnered promising market share in the E-SUV and 3-wheeler EV spaces.

Investments, Capex & Value Creation in Growth Gems

6. Nine key business “growth gems” have been identified, each targeting a 5x expansion in 5–7 years. The company’s capital allocation discipline, option value in subsidiaries (Tech Mahindra, Mahindra Finance, Mahindra Lifespaces, etc.), and ongoing investment in brand and market creation shore up future earnings potential.

Operating Efficiencies and Cost Management Discipline

7. M&M maintains tight rein on input costs and working capital, offsetting input price volatility (rising steel prices) through operational leverage and prudent inventory management. The company enjoys sufficient rare earth inventory to navigate immediate EV production needs, actively exploring substitutions to mitigate global supply risks.

Stock Levels and Investor Guidance

8. Key levels for M&M stock: Current Market Price (CMP): Rs 3,209 | Target Price: Rs 3,687 (15% potential upside). The research house foresees further rerating as the company capitalizes on strong demand for UVs, resilient tractor sales, high-margin product launches, and next-generation EVs. The stock trades at a forward P/E of 26.8x (FY26E) and 23.4x (FY27E), with rising ROE and robust dividend yields enhancing its appeal.

Final Take: Why Mahindra & Mahindra Is a Compelling BUY

9. Motilal Oswal’s verdict is emphatic—M&M stands poised for secular growth, underpinned by market leadership, innovation in product and technology, and disciplined execution across cycles. Investors seeking a blend of growth and value should accumulate the stock, leveraging M&M’s strong foundation, forward-looking EV agenda, and its ongoing quest for value unlocking via its portfolio of businesses. The BUY rating is buttressed by solid financials, tangible execution on strategic imperatives, and an institutional commitment to reward shareholders.