Volumes Grew 65% YoY To 113.2k Units, Buy This Auto Sector Stock For 14% Potential Upside

Motilal Oswal places a buy call on Mahindra & Mahindra Ltd. stock for a potential upside of up to 14% with a target price of Rs 1,450 per share. Mahindra & Mahindra is a homegrown large-cap Automotive manufacturer company having a market cap of Rs 1,56,685 crore.

The company's wholesales came in above the estimate of the brokerage at 113.2k units (est. 102.4k units), up 65% YoY. The tractor volumes grew 21% YoY to 48.7k units (est. 40.4k units). Domestic Passenger UV sales grew 163% YoY.

Stock Outlook

The current market price (CMP) of the stock is Rs 1,274.85 per share on NSE. Its 52 week low level is Rs 671.15 and the 52 week high level is Rs 1,338, respectively. The stock has reported decent returns over the past 5 years.

Returns Over The Years

The shares surged 1.35% in the past 1 week, and 2.38% negative returns in the past 1 month. It gave 15.46% positive return in 3 months and 53.26% in the past 6 months, respectively.

Over the past 1 year, the stock gave 52.9% positive return, and 126.03% multibagger returns in the past 3 years. In the past 5 years, it gave 95.76% positive return.

 

Key takeaways

According to the brokerage, the Tractors grew 21% YoY above the estimate; UVs (inline) rose 137%, but on a low base. Here are the key takeaways according to the brokerage firm:

• Wholesales came in above our estimate at 113.2k units (est. 102.4k units), up 65% YoY.
• Tractor volumes grew 21% YoY to 48.7k units (est. 40.4k units). We have factored in a volume growth of 7% for FY23, implying a residual growth of 1%, or 27.9k units/month.
• UV volumes (inline) grew 137% YoY (on a low base) to 57.9k (est. 56.2k units). Domestic Passenger UV sales grew 163% YoY. The same for Pick-ups and SCVs grew 137.5%. We expect UV volumes to grow by 48% YoY in FY23, with a residual growth rate of 31%, or a monthly run rate of 55.3k units.
• 3W volumes grew 94% YoY to 5.8k units (est. 5k units). We expect 3W volumes to grow by 75% in FY23, with a residual growth rate of 40%, or a monthly run-rate of 4.5k units.
• As per Mr. Veejay Ram Nakra, CEO, Automotive division, MM, "Sep'22 was a very exciting month with a strong start to the festive season. We see very strong demand and performance across our product portfolio: from SUVs, LCVs less than 3.5t, and our last-mile mobility brands. We are delighted that our SUVs have registered record sales of 34,262 units as well as record overall volumes of 64,486 units in Sep'22."
• Commenting on its performance in Sep'22, Hemant Sikka, President - Farm Equipment Sector, MM, said, "We sold 47,100 Tractors in the domestic market in Sep'22, a growth of 21% over last year. This is our highest ever monthly sales. Demand remained strong in Sep'22 owing to the festive boost. We expect the same to continue in Oct'22 as well. Harvesting of the Kharif crop will begin soon. And with crop prices holding firm, the sentiment is positive. An above-normal monsoon has improved reservoir levels, leading to high moisture content in the soil, which is very positive for higher food grain production in the upcoming Rabi season. In the export market, we have sold 1,613 Tractors, a growth of 26% over last year."
• The stock trades at a core P/E of 13.6x FY24E standalone EPS and 2.1x core P/B. We maintain our Buy rating.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. 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 making any investment decision.