Motilal Oswal, a leading research house, has reiterated a BUY call on Mahindra & Mahindra (M&M) with a target price of Rs 4,122, citing robust earnings, margin expansion, and strong growth prospects across both its automotive and farm equipment segments. The stock is currently trading at Rs3,581, offering a potential upside of nearly 15% for investors. M&M’s recent quarterly results have exceeded expectations, driven by healthy volume growth, improved margins, and a resilient rural demand environment. The company’s commitment to delivering 15-20% EPS growth and a return on equity (RoE) of 18% further bolsters its appeal for long-term investors. The Motilal Oswal research report provides a detailed, point-wise analysis of the key drivers, financials, and strategic outlook for M&M, along with clear price levels and target recommendations for investors.

Motilal Oswal’s BUY Recommendation for M&M

Motilal Oswal has maintained its BUY rating on Mahindra & Mahindra, setting a target price of Rs4,122 based on its September 2027 standalone sum-of-the-parts (SoTP) valuation. The current market price stands at Rs3,581, implying a potential upside of 15% for investors who enter at prevailing levels. The research house highlights M&M’s ability to outperform industry benchmarks, supported by robust earnings, margin expansion, and a healthy product pipeline.

Robust Earnings and Margin Expansion

M&M’s second-quarter FY26 PAT (profit after tax) came in at Rs45 billion, surpassing estimates due to better-than-expected margins in both the auto and farm equipment segments. The farm equipment segment saw a margin improvement of 220 basis points year-on-year to 19.7%, while the auto segment margin improved marginally to 9.2%. Excluding the impact of contract manufacturing for e-SUVs, the auto segment margin rose by 80 basis points to 10.3%. The company’s RoE for the first half of FY26 stood at 19.4%, well above its target of 18%.

Strong Volume Growth and Market Leadership

M&M’s revenue grew 21% year-on-year to Rs334 billion, driven by a 16% increase in volumes. The company’s retail volume growth for SUVs was in the mid-to-high teens during the festive season, with bookings even stronger. Management has maintained its mid-to-high teens volume growth guidance for SUVs for FY26. The tractor industry growth guidance has been raised to 10-12% from 6-7% earlier, reflecting positive rural sentiments and favorable rainfall.

Strategic Guidance and Industry Outlook

Management expects the momentum in the LCV (light commercial vehicle) segment to be sustained in the second half of FY26, with industry growth projected in the low double digits. The company’s market share in the below-3.5T LCV segment improved by 290 basis points to 51.9% in FY25. M&M plans to launch seven ICE SUVs, two mid-cycle enhancements, five BEVs, and five LCVs (two EVs) by 2030, with three ICE SUVs, two mid-cycle enhancements, two BEVs, and two LCVs (one EV) targeted for CY26.

Financial Highlights and Valuation

M&M’s financials for FY26E show sales of Rs1,405 billion, EBITDA of Rs203 billion, and adjusted PAT of Rs144.7 billion. The company’s EPS is expected to grow at a CAGR of 16-17-19% over FY25-28E. The current PE multiple is 29.7x, with a PBV of 5.9x and a dividend yield of 0.7%. The free cash flow yield is projected to improve to 4.3% by FY28E.

Key Price Levels and Target for Investors

- Current Market Price: Rs3,581 - Target Price: Rs4,122 (15% upside) - Support Level: Rs3,400 (short-term) - Resistance Level: Rs3,800 (intermediate) - Stop Loss: Rs3,200 (for risk-averse investors)

Segmental Performance and Outlook

- Auto Segment: PAT grew 18% YoY to Rs15.4 billion, with core ICE margins at 10.3% and contract manufacturing margins at 0.3%. - Farm Equipment Segment: PAT jumped 54% YoY to Rs11.6 billion, with PBIT margins at 19.7%. - Tractor Industry: Management expects industry growth of 10-12% in FY26, with M&M’s market share at 44% in H1FY26.

Valuation Table

Long Term Investment Thesis

Mahindra & Mahindra is well-positioned to outperform across its core businesses, driven by a healthy recovery in rural areas and new product launches in both UVs and tractors. The company’s commitment to delivering 15-20% EPS growth and an RoE of 18% ensures sustained profitability and shareholder value. With a BUY recommendation from Motilal Oswal and a target price of Rs4,122, M&M presents a compelling investment opportunity for both short-term and long-term investors. The stock’s robust earnings, margin expansion, and strong growth prospects make it a standout pick in the Indian automotive sector.