M&M soars 33% from 52-week low on hopes of steady performance

Shares of Mahindra & Mahindra (M&M) were up 1 per cent at Rs 892.30 on the BSE in Thursday’s intra-day trade. The stock has outperformed the market in past one month by surging 14 per cent on hopes of steady performance. In comparison, the S&P BSE Sensex was almost flat or up 0.35 per cent in past one month.

The stock of passenger cars & utility vehicles maker has bounced back 33 per cent from its 52-week low of Rs 671 touched on March 8, 2022. The stock had hit a 52-week high of Rs 978.90 on November 17, 2021.

Analysts expect strong volume outlook on the back of a robust order book in autos and new product launches across segments.
M&M management said the demand for auto sales continues to be strong, even as the company remain watchful of the global supply chain and take appropriate action, as required.

“Record procurement of Kharif acreage, substantial increase in exports of agricultural products like wheat, sugar and cotton will help improve the financial position of the farmers leading to better cash flow in the rural market to help boost tractor demand going forward. Acreage of kharif crop has already crossed last year’s levels, which augurs well for agri incomes. This will get a further boost with early forecast of a normal monsoon,” the management said.

Meanwhile, last week, M&M announced a price hike of 2.5 per cent on its range of vehicles with effective from April 14, 2022. The price revision is result of continuous increase in prices of key commodities such as steel, aluminium, palladium, etc. The company has taken necessary initiatives to partially offset the unprecedented hike in commodity prices to absorb the impact, passing a minimal percentage of cost increase to customers through a price revision, the company said.

M&M is expected to report a steady performance in January-March quarter (Q4FY22). Total tractor sales volumes for the quarter were at 0.73 lakh units, down 21.6 per cent quarter on quarter (QoQ) while automotive volumes were up 28.7 per cent QoQ to 1.56 lakh units.

“M&M remains on track with its commitment to launch eight new electric SUVs and LCVs each by 2027 starting from E-XUV 300 planned to be launched in H2FY23. It is also leading the electrification charge on e-3W front as well. M&M (farm + auto) is broadly a domestic oriented business with exports <10 per cent of its overall sales. With strong order backlog in automotive segment and market leadership in tractor space it is not likely to witness demand destruction. However, it may witness industry specific chip supply constraints and commodity led raw material price inflation,” analysts at ICICI Securities said in its auto sector update.