Auto major Mahindra & Mahindra (M&M) shares have been on the top gear, with the stock rallying more than 66% year-to-date (YTD), making it the top performer on the Nifty 50 index in H1 2024. M&M shares have significantly outperformed the Nifty Auto index, which is up 35%, and the Nifty 50 index, which has gained 11% YTD.
M&M share price has nearly doubled investors’ money over the past year, driven by robust business momentum across various segments, particularly growth in SUVs and successful new launches.
Analysts believe the company is poised to sustain the growth momentum led by increasing broader demand in the SUV segment and the company’s continued progress in Electric Vehicles (EV) penetration.
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Additionally, there is potential for M&M to enhance its penetration of tractors in the domestic market and capitalize on opportunities in the farm mechanization segment, which is currently underpenetrated in India compared to other developed countries.
M&M’s Utility Vehicle sales during the six months of 2024 (January-June 2024) increased 24% to 124,248 units from 100,162 units in the same period last year.
“M&M’s 66% YTD rally is driven by strong SUV sales, EV focus, farm equipment performance, and successful new product launches. Fundamentals appear solid with likely revenue growth and improved profitability from higher-margin SUV sales. The outlook remains positive, with expected continued SUV demand and progress in EV transition,” said Atul Parakh, CEO - Bigul.
In its investors’ meet recently, M&M highlighted its strategic roadmap for the Farm and Auto segments and announced plans to launch a total of 23 new vehicles by 2030, including new SUVs.
The company also plans to introduce seven Born Electric Vehicles (BEV) by the end of the decade and showcased three feature-rich BEV - E8, E9, BE.5.
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M&M made impressive strides in the Passenger Vehicle (PV) segment, gaining 170 bps share in FY24 to 10.9% from 9.2% in FY23. M&M's SUV market share has risen from 15% in FY21 to 18% in FY24.
“M&M business has grown very well led by the turnaround in the SUV segment and new model launches. The pick up in the tractors and farm equipment sales amid probability of better monsoon is likely to lead the next leg of rally for M&M shares,” said Sudip Bandyopadhyay, Group Chairman, Inditrade Capital.
He expects M&M stock price to see 10-15% more upside if the monsoon season is good which will aid the company’s farm equipment segment.
However, increasing competition and potential economic headwinds are the challenges going ahead for the automobile major.
“Future performance depends on maintaining growth momentum, successful EV strategy implementation, and navigating market dynamics. The farm equipment sector’s performance is tied to the rural economy. While the rally has been impressive, investors should monitor quarterly results, market share, and management guidance for a comprehensive view of M&M's prospects,” said Parakh.
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Elara Capital analyst Jay Kale expects M&M to grow ahead of the industry with new refreshes and battery electric vehicle (BEV) model launches.
“The long-term opportunity in domestic tractors with improving mechanization levels and global tractor market (where it currently has just a 5% share) would be supportive of tractor valuations. With rising EV penetration in PVs, the role of software defined vehicle (SDVs) is expected to increase; which has been a problem even for global legacy OEMs to master. We monitor M&M’s progress and effectiveness in SDVs in EVs once they are launched,” Kale said.
Elara Capital reiterated ‘Accumulate’ rating on M&M shares and raised the target price to ₹3,200 apiece from ₹2,717 earlier.
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Meanwhile, on Monday, M&M reported its overall auto sales for the month of June 2024 at 69,397 vehicles, a growth of 11%, including exports.
In the Utility Vehicles segment, Mahindra sold 40,022 vehicles in the domestic market, a growth of 23% and overall, 40,644 vehicles, including exports.
M&M’s total PV sales in 2024 so far (January - June 2024) increased 24% to 124,248 units from 100,172 in the corresponding period of last year.
Mahindra’s Farm Equipment Sector (FES) posted 6% growth in June tractor sales at 47,319 units, as against 44,478 units for the same period last year.
Also Read: Auto sales in June likely to be mixed bag with growth seen in two-wheelers, Passenger Vehicles
Technicals
While M&M has shown strong performance over the past year, suggesting a continuation of its trend in the medium to long term, recent technical indicators highlight potential challenges in the short term, according to KKunal V Parar, VP of Technical Research and Algo, Choice Broking.
“On the daily chart, we’ve identified a Negative divergence on the RSI, indicating a weakening momentum in the stock for the near future. Additionally, the weekly chart reveals a Bearish Engulfing candlestick formation, which typically signifies a potential reversal or downside movement ahead. Zooming into the hourly chart, M&M is currently trading below its 100-hour moving average, further supporting the view of short-term weakness,” Parar said.
Considering these observations, he anticipates a possible downside in M&M stock, with potential levels of support around ₹2,610 to ₹2,480. On the upside, resistance is noted near the ₹3,015 level.
“Traders and investors should monitor these levels closely and consider risk management strategies accordingly,” Parar added.
At 1:25 pm, M&M shares were trading 0.45% higher at ₹2,881.00 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
