Shares of Mahindra and Mahindra (M&M) surged 4 percent to Rs 2,959 on November 19 after CLSA reiterated its "outperform" rating, maintaining a target price of Rs 3,440. This indicates a potential upside of 16 percent from current levels.

Insights from CLSA's engagement with M&M’s management revealed strong confidence in the automaker’s growth trajectory, propelled by an ambitious pipeline of new model launches. Analysts foresee these launches driving growth in FY25–26.

Over the past five years, M&M has strategically shifted its domestic passenger vehicle (PV) portfolio, increasing the SUV mix from 35 percent to 55 percent. Future growth is expected to focus on mid and premium SUV segments, moving away from entry-level models.

Consumer preferences are also aligning with M&M’s strategy. Buyers are increasingly willing to pay a 10 percent premium for enhanced features, transitioning from traditional mileage-focused priorities. Furthermore, M&M is positioned to benefit from lower GST rates on internal combustion engine (ICE) vehicles, with consumers showing readiness to pay a slight premium for these models.

Electric SUVs (EVs) are anticipated to see significant growth in the domestic market over the coming years. However, analysts noted a slowdown in urban discretionary spending following three robust fiscal years up to FY24.

In Q2 FY24, M&M outperformed its peers with an 18 percent year-on-year (YoY) growth in PV volumes. In contrast, Maruti Suzuki, Tata Motors, and Hyundai Motor India reported YoY volume declines ranging from 2 percent to 9 percent during the same period.

In a separate note, Jefferies highlighted M&M’s strong tractor segment and improving automotive franchise. The report noted that the tractor industry is likely on the verge of a growth cycle, projecting a 13 percent volume CAGR and a 19 percent EPS CAGR for M&M over FY24–27E. Trading at 22 times FY26E core business PE, Jefferies considered the stock attractively valued, supported by M&M's diversified and strengthening business portfolio.

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