M&M hits new high, up 12% in 2 days; strong Q3, Volkswagen deal aid buying

M&M and Volkswagen have signed supply agreement on the use of key electric components of the German carmaker's open platform for electric vehicles (EVs).

Shares of Mahindra & Mahindra (M&M) hit a new high of Rs 1,864.65, as they rallied 6 per cent on the BSE in the Friday’s intra-day trade amid heavy volume after the company and Volkswagen signed supply agreement on the use of key electric components of the German carmaker's open platform for electric vehicles (EVs).

With today’s gain, the market price of M&M has rallied 12 per cent after the company said on Wednesday that the group delivered ‘solid’ operating performance across all business verticals except Tech Mahindra. The stock of Mahindra Group automobile company surpassed its previous high of Rs 1,758 touched on December 29, 2023.

In an exchange filing, M&M said Volkswagen Group and the company signed the first supply agreement on components of Volkswagen´s MEB for Mahindra’s purpose-built electric platform INGLO, taking a definitive step further on their joint vision for e-mobility collaboration.

The deal covers the supply of certain electric components as well as unified cells. Both companies will continue to evaluate a potential expansion of the collaboration, the press release said.

Volkswagen Group and Mahindra aim to strengthen their e-mobility footprint in the Indian automotive market and to accelerate the electrification in the region.

Mahindra plans to launch five all-electric SUVs in India based on its new, purpose-built electric platform INGLO, starting December 2024. With more than five million new vehicles per year in 2023, India is one of the largest automotive markets in the world.

The electrification of the passenger car segment is expected to gain significant momentum in the coming years, the company said.

Meanwhile, analysts expect strong SUV run to continue as demand remains healthy. Within the Auto sector, the robust order book of Scorpio N variants, Thar and XUV family should rapidly cater to the waiting period. New launches in both ICE and EV segments should further drive further volumes.

M&M has over time exited its loss making businesses and have turned around several businesses which would definitely gather confidence of shareholders. The company has identified several growth gems, which can leverage the core strength of M&M group and accelerate the growth for the company over the medium term.

LKP Securities maintain BUY rating on attractive valuations; SoTP-based target price stands at Rs 2,051 (Rs 1,676 core business valued at 11x rolled over FY26E earnings + subsidiary valuation of Rs 375) in line with its assumptions of margin improvement on increase in volumes and value of SUV where the brokerage firm expect market share to bounce back on new launches, 3Ws and LCV segments, production increase offering operating leverage, price hikes and prudent cost reduction measures.

 “We believe negatives of farm equipment segment (FES) segment is factored in the price and we expect a recovery in tractor volumes in FY25E on expectations of normal monsoons by the weather departments,” the brokerage firm said.