Fundamentally Strong Auto Stock to Buy Now for 30% Upside Potential – Do You Own It?
Strong Auto Stock : India’s automotive market has been witnessing dynamic changes, especially with the rising demand for utility vehicles and electric SUVs. Amidst this shifting landscape, one auto stock stands out as a lucrative investment opportunity – Mahindra & Mahindra Ltd (M&M). Supported by strong fundamentals, strategic growth drivers, and a promising electric vehicle (EV) lineup, M&M is well-positioned for a potential upside of 30%. Let’s explore why this stock is a must-buy right now.
Market Overview: Mixed Trends in Passenger Vehicle Sales
In September 2024, India’s passenger vehicle market saw a 3.4% decline, with total sales reaching 363,078 units. Passenger cars faced a significant dip of 17.1%, but utility vehicles (UVs) bucked the trend with a 6.7% growth, totaling 225,942 units. This rise in UV sales highlights a growing consumer preference for larger vehicles, particularly SUVs, which plays directly into M&M’s strategic focus on utility and electric SUVs.
Price Movement and Potential Upside
As of the latest trading session, Mahindra & Mahindra shares were trading at ₹2,835 apiece, reflecting a 0.15% rise from the previous close of ₹2,830.35. With a robust market capitalization of ₹3.52 lakh crore, the stock exhibits strong investor confidence.
Brokerage Recommendations: A Bullish Outlook
Leading global brokerage Nomura has given a ‘Buy’ call on M&M, setting a target price of ₹3,681 per share. This target indicates a potential upside of 30% from the current price level.
Why Mahindra & Mahindra is a Strong Buy
1. Impressive Electric SUV Launch and Bookings
Mahindra & Mahindra’s recent launch of its electric SUVs, including the XEV 9e and BE 6 models, was met with overwhelming demand. These models collectively secured 30,179 bookings on the first day itself, amounting to a total booking value of ₹8,472 crore.
Key Highlights of the EV Launch:
- The XEV 9e and BE 6 account for 56% and 44% of total bookings, respectively.
- These premium electric SUVs are priced between ₹18.9 lakh and ₹30.5 lakh.
- Notably, 73% of orders were for the high-end 79 kWh Pack Three, highlighting the growing acceptance of premium EVs in India.
This remarkable booking volume underscores the consumer confidence in Mahindra’s vision of providing high-performance electric SUVs that combine luxury, performance, and cutting-edge technology.
2. Strategic Revenue Drivers and Market Dynamics
M&M’s diversified business model is driving consistent revenue growth across its core sectors. The key drivers include:
- 16% rise in the auto and farm sectors.
- 1.9x growth for Tech Mahindra, its IT arm.
- 47% increase in Mahindra Finance.
- 33% growth in its growth gems segment.
The company also achieved a 51.9% market share in the Light Commercial Vehicle (LCV) segment, increasing by 230 basis points. Meanwhile, the Farm Machinery segment recorded a 12% revenue growth, with expectations of further growth driven by favorable MSP dynamics and improved reservoir levels.
3. Robust Electric Vehicle Strategy
Mahindra & Mahindra is strategically positioning its electric SUVs as aspirational lifestyle products. The company has set an initial target of producing 5,000 units per month for its new EV models. Additionally, their promotional campaigns have attracted over 1.4 billion views, reflecting strong customer interest.
4. Future Outlook: Continued Growth Ahead
M&M’s management remains optimistic about sustained demand, driven by tax savings and interest rate cuts that favor middle-class consumers. This positive market sentiment is expected to support growth in the tractor and auto segments well into the next fiscal year.
Financial Ratios and Key Metrics
To give you a comprehensive view of Mahindra & Mahindra’s financial health, here are some essential financial ratios:
| Metric | Value |
|---|---|
| Market Cap | ₹ 3,51,173 Cr |
| Current Price | ₹ 2,824 |
| High / Low | ₹ 3,276 / 1,789 |
| Stock P/E | 28.3 |
| Book Value | ₹ 567 |
| Dividend Yield | 0.76 % |
| ROCE | 13.6 % |
| ROE | 18.4 % |
| Debt to Equity | 1.66 |
| Price to Earning | 28.3 |
| Promoter Holding | 18.5 % |
| Pledged Percentage | 0.02 % |
| QoQ Profits | 7.84 % |
| Qtr Profit Var | 19.6 % |
| Industry PE | 27.6 |
| Graham Number | ₹ 1,127 |
| Intrinsic Value | ₹ 1,270 |
| RSI | 36.6 |
| EPS | ₹ 99.6 |
| No. of Shares | 124 |
| PEG Ratio | 1.69 |
| DMA 200 | ₹ 2,767 |
Conclusion: Why You Should Consider Buying M&M Now
Mahindra & Mahindra Ltd is clearly one of the best-positioned auto stocks in the Indian market today, driven by:
- Strong EV launch and high bookings, showcasing consumer trust.
- Consistent revenue growth across its diversified portfolio.
- Positive future outlook, supported by favorable market dynamics.
- Fundamentally sound financials with attractive valuations.
With a 30% upside potential as indicated by Nomura’s target price of ₹3,681, Mahindra & Mahindra presents an excellent investment opportunity for both short-term gains and long-term wealth creation.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.