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Prabhudas Lilladher Report
We increase our FY24/FY25 earnings per share estimate of Mahindra and Mahindra Ltd. by 13%/8% to factor in higher average selling price, margin beat, higher other income.
M&M’s Q1 FY24 revenue came above our and consensus estimate, led by higher-than-expected ASPs at the automotive segment. Ebitda margin at 13.4% came above our estimate of 12.7%, and largely in line with consensus.
Management noted that commodity costs have softened and should support margins, coupled with better mix, operating leverage and price hikes. Supply issues have normalised and M&M is on track to reach 49,000 unit exit SUV capacity for FY24.
M&M noted no change in capital allocation policy and tried to calm investor concerns with detailed presentation on the same, which we think should help in investor confidence.
M&M should benefit from-
growing customer preference for SUV,
rampup in production to fulfill strong demand and order book,
market share gains in the tractor industry from new segments,
ramp-up in electric vehicle portfolio starting 2025.
Also, benign raw material, operating leverage and end of volume of introductory priced model would benefit margins (we built-in 160 bps expansion over FY23-25E).
Retain ‘Buy’ with target price of Rs 1,760 (18 times on March-25E core earnings per share and Rs 360 for subsidiaries) versus Rs 1,685 earlier.
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