Buy This Multibagger Large Cap Auto Stock, Shares Can Surge 12%: Prabhudas Lilladher

Stock Outlook

The current market price (CMP) of the stock is Rs 1,255 apiece, trading 3.24% down from its previous close. The 52-week low of the stock is Rs 671,15 apiece recorded in March 2022 and the 52 week high is Rs 1,338 apiece recorded in September 2022, respectively.

Returns on Investment

In the past 1 week, it has given a negative return of 3.22% and in the past 1 month, it has given a negative return of 2.25%. Whereas, in the past 3 months, it gave a positive return of 25.28%. Over the past 1 year, it gave a return of 66.37%. In the past 3 years, the stock gave a 134.54% multibagger return and in the past 5 years, it gave 94.61% positive return, respectively.

XUV400 launch – M&M’s first new generation electric SUV

M&M has made its entry into the EV space with XUV400, launched on 8th Sep-22, which is based on the XUV300 subcompact SUV. Though the company has now showcased the product, deliveries will only begin in the end of Jan-23. Pricing announcement and booking opening will happen in Jan-23.

Upping the competition in the e-SUV space

XUV400 will go against Tata's Nexon EV, Hyundai Kona and MG ZS. Nexon EV Max is priced at ~Rs 18-20 lakhs (ex-showroom), and we expect a similar pricing for XUV400. XUV400 has notched up the competition in e-SUV space, which is currently dominated by Tata Nexon EV - present in the B-segment (3.85-4m, Nexon EV has 3.5% share in this segment). However, M&M believes there remains a big electric opportunity in the C-segment (4-4.5m) where Kona and ZS each, have less than 1% market share.

Conspicuous features

XUV400 comes with a combination of best in class features in terms of performance, range and safety. It comes with a battery pack of 39.4kWh and claims to deliver 456km in a single charge vs Nexon EV Max's 40.5 kWh and driving range of 437km. It has adopted length of 4200m vs Nexon EV's 3993m, which makes it fall under the C-segment. It supports DC fast charging of 0% to 80% in 50 mins and acceleration from 0-100kmph in 8.3 sec (better than competition). It comes with 3 drive modes - Fun, Fast and Fearless, along with a new feature of 'one pedal drive'.

Plans ahead

Under Mahindra's partnership with Volkswagen (VW's MEB electric components for M&M's INGLO platform), the company will launch five models with two brands - XUV and BE. It plans to build models specific to Indian markets with its SUV modular platform. Mahindra expects its EV models to generate 20% to 30% of its total SUV sales by 2027. XUV e8 is planned to launch in Dec-24, XUV e9 in Apr-25, BE 05 in Oct-25 and BE 07 in Oct-26; BE 09 launch undecided. Also, the newly launched XUV400 will move into the new company - EVCo.

EV success can re-rate the stock

M&M unveiled first electric SUV - XUV400, based on its XUV300 subcompact SUV. With this launch, M&M has notched up the competition in the affordable e-SUV segment in India, which is currently ruled by Tata Nexon EV (Tata recorded 87% EV market share in FY22). XUV400 comes with a battery pack of 39.4 kWh, similar to Nexon EV Max's 40.5 kWh. However, compared to 437km range in a single charge from a slightly bigger battery pack in Nexon EV Max, XUV400's battery offers a longer range of 456km - owing to better technology. M&M believes, there remains a vast electric opportunity in the Csegment (4-4.5m), contrasting to Tata Nexon EV's presence in the B-segment (3.85-4m, Nexon EV has 3.5% share in this segment). We expect XUV400 to come with a price tag of Rs 18-20 lakhs, similar to its competition Nexon EV Max. Price announcement, Bookings are expected in Jan-23, deliveries will commence from end of Jan-23.

Buy For Target price of Rs 1,400

The brokerage said, "M&M is one of our preferred picks in the auto space given (1) back-to-back successful launches in the highly competitive SUV space, (2) its leadership position in tractor industry, (3) its proactiveness to leverage the EV trend can lead to value unlocking and (4) its well-played out capital allocation strategy. Currently, we are not assigning any value to EVCo, as it doesn't have any material presence in e-PV segment. However, success of XUV400 along with market share gains can re-rate the stock. Reiterate BUY with a Jun-24 target price of Rs 1,400 (18x on core EPS and Rs 285 for subsidiaries)."

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.