Buy This Largecap Auto Stock With Rs. 1590, Thorough Focus On EV: ICICI Direct

ICICI Direct, a top brokerage firm recommends investors to buy the stock of Mahindra & Mahindra. M&M recently concluded its EV day showcasing its upcoming EV products and the competitive strength of the new platform. M&M shared comprehensive plans with timeline in the EV space and would want to stick to its core SUV strength (4.3-4.7 m) in the e-mobility space.

Stock To Buy: Target Price & Financials

The Current Market Price (CMP) of Mahindra & Mahindra is Rs. 1,300. ICICI Direct has estimated a Target Price for the stock at Rs. 1,590. It is a mid-cap stock with a market capitalization of around Rs. 6,111 crore. This stock has the potential to give 22% return, in the upcoming 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1,300
Target Price	Rs. 1,590
Potential 1 year return	22.00%
52 week high share price	Rs. 1,338
52 week low share price	Rs. 671.15

Financials

The company's net sales in FY22 was recorded at Rs. 57,446 cr, which is expected to be at Rs. 76,519.8 cr in FY23. Their EBITDA in FY22 stood at Rs. 7,042.3 cr, which is expected to be at Rs. 8,800.9 cr in FY23. The company's adj. net profit in FY22 was recorded at Rs. 5,100.4 cr, which is expected to be at Rs. 5,845.5 cr in FY23.

Stock Advantages: ICICI Direct

"We maintain buy on M&M amid continued RoCE focus, proactive approach towards electrification and inexpensive valuations among peers. We expect 23.4% FY22-24E revenue CAGR backed by 24.8% volume CAGR in automotive space; margins seen at 12.7% along with RoE of 15% by FY24. Strong order book in PV business amid innovative and tech enabled new product launches & capex spends to scale up execution capabilities. M&M's stock price has grown at ~14.9% CAGR (Rs. 647 levels in September 2017), outperforming Nifty Auto index in that time," the brokerage firm said.

Focus on electric vehicles (EVs)

The management targets to sell 20-30% of its SUV portfolio as electric vehicles (EVs) by 2027, around 2 lakh units, entire EV capex outlay pegged at Rs. 9,000-10,000 crore, which includes INGLO platform shared by all upcoming born electric cars, manufacturing set-up, cost of developing products including XUV 400 (specific spend at Rs. 600 crore), upcoming collaborations in the charging infra space, born electric vehicles supporting all new age tech features including ADAS level 2+ with battery size pegged at 60-80 Kw hr with a targeted certified range of 652-675 km.

Capital expenditure and MoUs

The company plans to spend Rs. 9,000-10,000 crore for all six platforms including Rs. 600 crore of expenditure done for developing XUV 400. For the charging space, the management clarified that it will not make new investments and would be leveraging partnerships/collaborations for the same. Currently, the company is close to signing three MoUs for the charging space to leverage existing charging infra (private charging, fast charging at M&M's dealership, existing fast charging infrastructure).

Company Portfolio

M&M is a conglomerate with a presence in auto, IT, financial services, logistics, hospitality, real estate among others. At the standalone level, it is India's largest tractor manufacturer (~40% FY22 market share) & second largest CV, fourth largest PV maker (24.7%, 7.4% FY22 market share, respectively)

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.