M&M stock surges 8% on strong Q4 earnings; market cap tops Rs 3 trn-mark

Mahindra & Mahindra's market capitalisation touched Rs 3.18 trillion in Friday's intra-day trade on the BSE.

Mahindra & Mahindra (M&M) today joined an elite club of companies having a market capitalisation (m-cap) of Rs 3 trillion after the stock price of the automobiles and tractors major hit a new high of Rs 2,554.75, surging 8 per cent on the BSE in Friday’s intra-day trade. In past four trading days, the stock has zoomed 17 per cent.

M&M’s m-cap touched Rs 3.18 trillion in intra-day trade. At 09:39 am; with Rs 3.15 trillion m-cap, M&M jumped to 22nd position in the overall m-cap ranking, the BSE data shows. M&M today surpassed Avenue Supermarts (D-Mart), Titan Company and Hindustan Aeronautics in m-cap ranking.

In past two trading days, the stock has rallied 11 per cent after M&M reported better-than-expected earnings for the quarter ended March 2024 (Q4FY24) with 32 per cent year-on-year (YoY) jump in standalone net profit at Rs 2,0238 crore, riding on a 12 per cent YoY growth in revenue to Rs 25,436 crore.

Auto margins improved 170bp YoY to 8.8 per cent, while farm equipment segment (FES) margins improved to 15.8 per cent (+60bp YoY) despite a decline in volumes due to cost optimization and benign raw material costs. Strong demand momentum for its utility vehicles (UVs) (new launches + order backlog) and an expected revival in tractor demand (post base correction in FY24) are likely to be the key growth drivers over FY24-26E, Motilal Oswal Financial Services said.

M&M maintained its previous guidance of mid-to-high teens growth in FY25, led by new launches (XUV 3XO, Thar 5 door) and product interventions (launch of lower variants of XUV700).

The company expects tractor industry volumes to grow 5 per cent YoY in FY25, aided by above-normal monsoon as predicted by IMD. H1FY25 is likely to remain weak due to ongoing elections, but H2FY25 should see a notable pickup. Apr’24 volumes are better than what M&M expected.

HDFC Securities said they continue to remain positive on the business momentum, given a strong order backlog for UVs may help it further gain share; recent new launches may help gain share in tractors; focused strides taken to achieve a strong position in EVs. The brokerage firm increased the PE multiple for the standalone business to 21x (from 16x) and revised the SoTP price target to Rs 2,318/share (earlier at Rs 1,862/share).

“The tractor segment’s volumes are expected to recover from Q2FY25E, driven by expectation of a normal monsoon and favorable terms of trade for farmers. Furthermore, we expect the SUV segment’s demand to continue to outperform, driven by strong demand trends in the SUV segment and successful new launches (XUV 3XO),” said Kotak Securities in its result update.

Overall, the brokerage firm remains constructive on M&M, as it continues to execute well by maintaining a leadership position in all three segments, improvement in its return ratio and cash flow generation, and being well-prepared for the EV transition. The stock however, was trading above its target price of Rs 2,550 per share.