Stock To Buy: Motilal Oswal Suggests This Automobile Stock, Announces Rs. 11.55 Dividend

Motilal Oswal, a renowned brokerage firm has recommended investors to buy the stocks of Mahindra & Mahindra (M&M). The company has also announced a final dividend of Rs. 11.55/share, which will be profitable for investors.

Target Price, Current Market Price, And Market Capitalization

The Current Market Price (CMP) of Mahindra & Mahindra is Rs. 998. Motilal Oswal has estimated a Target Price for the stock at Rs. 1150. Stock is anticipated to give a 15% return, in 1 year. The company is a large-cap company with a market capitalization of Rs. 128,645 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 998
Target Price	Rs. 1150
Potential 1 year return	15.00%
52 week high share price	Rs. 1,043.00
52 week low share price	Rs. 671.15

The company's standalone revenue/EBITDA/adjusted PAT increased by 28%/-0.5%/17% YoY to Rs. 171.2b/ Rs. 19.45b/ Rs. 11.7b. Additionally, standalone revenue/EBITDA/adjusted PAT grew by 29%/4%/26% in FY22, while volumes grew 13% YoY. Showing a positive trend, its net realizations have improved by 13% YoY to ~Rs. 748.5k/unit, led by ~7%/12% growth in Auto/Tractor realization. PBIT margin for the Auto business improved by 60bp YoY (+190bp QoQ) to 5.6%. Higher other income and lower tax boosted adjusted PAT to Rs. 11.9b, above the firm's estimation, up 19% YoY.

Mahindra & Mahindra's stock advantages, risks: Motilal Oswal

According to Motilal Oswal, "M&M's 4QFY22 performance was above our estimate as a strong recovery in the Auto business made up for weakness in the Tractor business. While the outlook for Tractors is improving, we expect the Auto business to be a major driver of growth over the next couple of years, led by strong momentum in both SUVs (driven by new products and the easing of supply issues) and LCVs (cyclical recovery). We raise our FY23E/FY24E standalone EPS estimate by 12%/7% to factor in an improving outlook for Tractors."

The firm added, "While the outlook for Tractors has improved, we expect the Auto business to be the key growth driver over the next couple of years. It is seeing an ease up in rural stress as there was a tremendous increase in momentum during Navratras due to wheat exports and no unseasonal rains in Mar'22. The momentum has got diluted a bit after the wheat export ban."

Mentioning the risks, the firm said, "Benefit of operating leverage diluted the fall in EBITDA margin by ~320bp YoY to 11.4% (est. 10.3%). EBITDA was flat YoY at Rs. 19.45b. PBIT margin for the Tractor business declined by 630bp YoY (-160bp QoQ) to 15.7%. Gross margin contracted by ~730bp YoY to 23.6% because of higher RM cost and weaker mix."

About the company:

M&M is a leading player in the automobile sector in India. They have planned an additional investment of Rs. 2900 crore to surge its production capacity for new products. M&M will have a CAPEX of Rs. 17,000 crore for a 3-year plan, from FY22 to FY24, including Rs. 1,900 crore for the automotive segment. The company is also focussing on EV segment. They are also planning to launch a fresh EV of XUV300 SUV in Q4, FY23. Contributions from subsidiaries/JVs/associates continued to improve, with a net contribution of ~Rs. 10.9b in FY22. Net contribution from Auto subsidiaries was a PBIT loss of Rs. 834m. The company's farm subsidiaries recorded the seventh consecutive quarter of positive EBIT. Net contribution from FES subsidiaries at the PBIT level was Rs. 3.1b in FY22.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.