IDBI Capital Suggests Buy Mahindra & Mahindra For 48% Potential Upside, Stock Hits 52 Week High

IDBI Capital, a well-known brokerage firm today published a repro on Mahindra & Mahindra Ltd (M&M), a leading homegrown automobile company, where the brokerage has given a buy call to the company for a target price of Rs 1,643/share. Shares of M&M hit their all-time high today a day after the manufacturer launched the latest edition of its popular SUV 'Scorpio-N.' The automaker claimed that the new SUV was the biggest, most powerful and most advanced version among all Scorpio models till date.

Event Update - Scorpio N

Mahindra & Mahindra (M&M) yesterday launched the much-awaited Scorpio N, priced at Rs11.99 -19.5 lakh (ex-showroom) in five variants across seven colors. Built on a new third-generation body on a frame platform, new Scorpio N is completely newly developed product with no carryover components of the existing Scorpio. It is powered by a 2.0-litre mStallion turbo petrol engine/ 2.2-litre mHawk diesel engine. Its prominent features include an 8-inch touchscreen, a sunroof, Alexa Voice Command, 3D immersive Sony sound system and up to six airbags. The Scorpio N has the lowest CO2 emission in the segment. M&M has incurred overall investment of Rs16bn for development of Scorpio N which includes setting up automated manufacturing line. Scorpio N is likely to open for booking on 30th July 2022 while delivery is expected start during festive period.

Stock Outlook

Today, the shares of the Mahindra & Mahindra Ltd hit a fresh 52-week high at Rs 1,121.45 and closed at Rs 1,110.50/share. Its 52-week low is Rs 671.15/share, recorded on March 08, 2022. The stock was opened at Rs 1,082/share, while the previous close was Rs 1,082/70/share. The PE ratio is 21.02. The P/B ratio is 2.37. EPS -TTM is Rs 52.91. The market capitalisation is Rs 1,38,243 crore.

As mentioned, the stock has hit its fresh 52-week high today. It has given decent returns on investments over the past 5 years. In the past 1 month, it gave positive returns of 16.7%, followed by 44.56% in 3 Months, 40.14% in 1 year, 69.68% in 3 years, and 64.01% in 5 years.

The shares of the company have the potential to increase by approximately 48% in 18 months, based on the estimated target price by the brokerage and the CMP of the stock.

Key Highlights and Investment Rationale

Given the refreshing stylish look, additional best-in-class features and attractive price compared to peers, Scorpio N has a potential to create 'wow' factor for itself. We believe, Scorpio N is likely to become next XUV700 phenomenon for M&M and can become major volume driver for the company going forward.

Brokerage suggests buying for Rs 1643/share

To factor in a strong response to its existing models and a similar response to Scorpio N, we have increased our Volume and PAT estimates by 4% and 8.3% respectively for FY24 respectively.

"M&M's core business (Auto and Farm), net of subsidiary valuations of Rs563/share, is quoting at PER of 7.9xFY24 earnings. We raise our price Target to Rs1643 - 52% upside potential over next 18 months," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.