Buy Mahindra and Mahindra; target of Rs 3860: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Tractor sales growth: MM's tractor sales are expected to be strong, driven by a normal monsoon next year and increasing mechanization in rural areas.
  • SUV sales growth: The company's SUV sales are expected to continue their robust performance, with a market share of 24.3% and a waiting period of 5-7 months for some models.
  • Capacity expansion: MM's capacity expansion plans are on track, with a planned increase in capacity to 92k units by FY28 exit and further expansion to 132k units by H1FY31.
  • Farm segment recovery: The farm segment is expected to recover from the current soft patch, driven by a normal monsoon next year, accelerating exports, and exits from less profitable international businesses.

Thesis Validation Checklist

  • Tractor volume growth: Watch for tractor volume growth in FY28, which is expected to be driven by a normal monsoon and increasing mechanization in rural areas.
  • SUV market share: Monitor MM's SUV market share, which is expected to remain robust.
  • Capacity utilization: Track MM's capacity utilization, which is expected to improve with the planned expansion.
  • Farm segment margins: Watch for an improvement in farm segment margins, driven by a normal monsoon, accelerating exports, and exits from less profitable international businesses.