Shares of Mahindra & Mahindra (M&M) on Thursday jumped over 4% to the day's high of Rs 1,725.95 on BSE after brokerages raised their target prices as better than expected average selling prices (ASP) were offset by weaker gross margins in the Q3 results.
During the December quarter, Mahindra's revenue growth was driven by volume growth of 11% YoY. ASP grew 5% YoY while gross margins expanded 60bp to 24.6% driven by softer commodity costs. The standalone profit rose 61% YoY to Rs 2,454 crore.
Also Read | M&M Q3 Results: Profit surges 61% YoY to Rs 2,454 crore, but misses estimate
Here's what brokerages said on M&M's Q3 results:
Nomura
Nomura has raised the target price from Rs 1,980 to Rs 2,143 and maintained M&M as a top pick.
"We are quite optimistic about the structural growth of SUVs in India and MM’s strong positioning within the same. We believe MM’s SUV/EV model cycle is strong and an order book of ~5-6 months gives visibility that MM’s growth will remain well ahead of the Industry. While investors are concerned about the tractor industry’s decline, we still expect MM’s EBITDA growth to be 17% y-y in FY24F," it said.
Jefferies
While we like MM's strong tractor and improved auto franchise, we believe the stock is unlikely to deliver meaningful returns until tractor demand visibility improves. Stock is not cheap at 17x FY25E core business PE vs a long-term average of 14x. We fine-tune estimates and retain Hold with Rs1,615 PT (earlier Rs1,580).
Kotak Institutional Equities
Automotive division demand trends remain healthy, while we expect the tractor volume demand to recover post 1QFY25E. The company continues to execute well by maintaining a leadership position in all three segments, improved return ratio as well as cash flow generation and well-preparedness for EV transition. Retain ADD with a revised FV of Rs 1,800.
Motilal Oswal
MM’s auto business is expected to be the key growth driver for the next couple of years on the back of its healthy order backlog and new launches. The near-term outlook for tractors remains weak, but we expect tractor demand to revive to mid-single-digit growth amid favorable indicators. We estimate a CAGR of ~12%/15%/16% in revenue/EBITDA/PAT over FY23-26. We maintain our BUY rating with a TP of Rs 2,005.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
(You can now subscribe to our ETMarkets WhatsApp channel)
