This Large Auto Company’s Net Profit Up 67% In Q1, Buy Stock For 26% Short Term Return: ICICI Securities

Stock To Buy: Target Price & Financial Results

The Current Market Price (CMP) of Mahindra & Mahindra is Rs. 1235. ICICI Securities has estimated a Target Price for the stock at Rs. 1550. This stock has the potential to give a 26% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 153,646 crore.

Stock Outlook
Current Market Price (CMP) Rs. 1235
Target Price Rs. 1550
Potential 1 year return 26.00%
52 week high share price Rs. 1,278.50
52 week low share price Rs. 671.15

The company has posted a steady Q1FY23 results. Its standalone net sales rose 14.5% QoQ to Rs. 19,613 crore, and EBITDA margins at 11.9% were up 57 bps QoQ. Additionally, M&M’s standalone PAT for the quarter came in at Rs. 1,430.2 crore up 10.7% QoQ. The company’s revenue gained by 67% YoY to Rs. 19,613 crore from Rs. 11,765 in Q1FY23.

ICICI Securities: Advantages Of The Stock

ICICI Securities: Advantages Of The Stock

Commenting on the stock, ICICI Securities stated, “We build 17.1%, 23.4% total volume, sales CAGR over FY22-24E on the back of healthy order book amid robust consumer response to new launches. With operating leverage benefits at play, improving product mix (higher share of premium models in PV space) and focus on optimizing cost; we expect 12.7% EBITDA margins and ~14% standalone RoCE by FY24E. Consistent focus on prudent capital allocation (>18% RoCE), aggressive EV launch plans, dominant position in rural markets to act as positives.”

“The stock price has grown at ~12% CAGR from ~Rs. 710 levels in August 2017, outperforming the wider Nifty Auto index. We retain a buy rating amid new launches that led to healthy demand prospects across M&M’s product profile and tangible steps towards EV transformation. We value M&M at an SOTP-based target price of Rs. 1,550 (10x FY24E standalone EV/EBITDA; 30% holding company discount to investments, Rs. 225/share value accrued pursuant to recent equity raise for Electric PV arm) ,” the brokerage firm added.

Company portfolio:

Company portfolio:

Mahindra & Mahindra (M&M) is a conglomerate with a presence in auto, IT, financial services, logistics, hospitality and real estate among others. At standalone level, it is India’s largest tractor manufacturer (~40% FY22 market share) & second largest CV, fourth largest PV maker (24.7%, 7.4% FY22 market share). Its capex spends to build capacities in response to robust demand prospects.

Disclaimer

Disclaimer

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

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