Mahindra & Mahindra Shares Soar 7% Following Strong Q4 Results; Analysts Remain Bullish On Auto Giant

Mahindra & Mahindra Ltd (M&M) witnessed a significant surge in its share price, rallying over 7% in early trade on Friday following a wave of bullish sentiments from analysts. This spike came in the wake of the company's robust performance in the fourth quarter of FY24, wherein it reported healthy growth in net profit and revenue.

M&M reported a 31.6% year-on-year (YoY) increase in net profit for Q4FY24, reaching Rs 2,038.21 crore compared to Rs 1,548.97 crore in the corresponding period last year. Meanwhile, the company's revenue from operations also saw a healthy uptick, rising by 11.24% to Rs 25,108.97 crore from Rs 22,571.37 crore YoY.

During the fourth quarter, M&M's automobile segment witnessed a 14% YoY growth in volumes, totalling to 2,15,280 units. However, tractor sales experienced a slight dip of 20% YoY, amounting to 71,039 units.

The optimistic outlook on M&M's future prospects has been echoed by various brokerage firms. Nuvama Institutional Equities highlighted the robust revenue visibility in the auto segment, fueled by a substantial UV order book and a promising launch pipeline in FY25, including the introduction of Thar five-door and dedicated platform EVs. Factoring in these developments, the firm raised its earnings per share (EPS) estimates for FY25E and FY26E by 8% and 13% respectively, alongside an upward revision of the share price target to Rs 2,760 per share.

Similarly, Motilal Oswal Financial Services lauded M&M's Q4FY24 performance, surpassing their estimates across all metrics. The firm raised its EPS estimates for FY25 and FY26 by 6% and 11% respectively, foreseeing a compound annual growth rate (CAGR) of approximately 17%, 20%, and 16% in revenue, EBITDA, and PAT over FY24-26. Despite the increase in capex guidance for FY25-27, Motilal Oswal maintains a positive outlook, citing an attractive implied core P/E ratio compared to peers.

Jefferies has upgraded M&M's stock rating to 'buy' from 'hold' and significantly raised the target price to Rs 2,910, indicating a potential upside of 23% from the current level. This bullish sentiment is grounded in the belief that M&M's valuations remain undervalued compared to its peers, with the company's expanding utility vehicle portfolio and capacity serving as key drivers for growth.

Contrastingly, CLSA has taken a more pessimistic stance by downgrading the stock to "sell." Despite acknowledging the recent rally in M&M's stock price, CLSA points out that the net profit increased by only 4% during the quarter, primarily attributed to weak performances from Tech Mahindra and M&M Financial Services. However, even with the downgrade, CLSA has raised its price target on the stock to Rs 2,312 from Rs 2,115, indicating a slightly more optimistic outlook.

Morgan Stanley maintains its 'overweight' call on M&M, projecting the company to retain its position as the fastest-growing passenger vehicle manufacturer in FY25. Additionally, Morgan Stanley anticipates a turnaround in M&M's farm business, which has faced challenges in recent quarters. The management echoes this sentiment, highlighting factors such as anticipated improvements in farm output, agricultural exports, and government initiatives as catalysts for recovery in the farm segment in the second half of FY25.

In contrast, CLSA has revised its rating on the stock to "sell," citing the recent surge in its value. The brokerage firm pointed out that the net profit saw a mere 4% increase during the quarter, primarily attributable to lacklustre performances from Tech Mahindra and M&M Financial Services. Despite this downgrade, CLSA has adjusted its price target for the stock upward, from Rs 2,115 to Rs 2,312.

Out of the 41 analysts covering M&M, 36 have a "buy" rating on the stock, underscoring confidence in its potential for growth. This optimism is further bolstered by the company's recent announcement of a Rs 12,000 crore investment in its electric vehicle (EV) unit, Mahindra Electric Automobile, from FY25-27.

With M&M's shares reaching a record high of Rs 2,554.75 apiece on the BSE, investors are eyeing the company's future moves and its execution of expansion plans outlined in its long-term guidance.

As of 10:05 am on May 17, M&M's shares were trading with gains of over 6% at Rs 2,523 per share on the National Stock Exchange (NSE). The stock has witnessed a rally of 40% year-to-date and nearly 90% over the past 12 months, making it the top performer on the Nifty 50 index.

The optimistic projections from these brokerage firms underline the confidence in M&M's ability to sustain and accelerate its growth trajectory, driven by both the automotive and farm segments. Analysts anticipate a resurgence in the farm segment fueled by favourable monsoon conditions, supportive government policies, and improved terms of trade for farmers.