Mahindra & Mahindra cranks into top gear as demand tailwinds accelerate growth

M&M is looking to capitalize on its market leadership in the automotive and farm segments and unlock the potential of its key subsidiaries—Mahindra Lifespaces, Mahindra Holidays, and Mahindra Last Mile Mobility, which it has identified as its “growth gems".

The outlook for M&M’s automotive business is upbeat, with the company focusing on new launches.

In the fast-growing sports utility vehicle segment, where M&M holds the top spot in terms of revenue market share at 20.4%, the company plans to launch nine regular SUVs (including three model refreshes) and seven battery electric vehicles (BEV) by 2029-30. 

The company also plans to introduce its first ‘born-electric’ vehicle in the first three months of 2025, and is targeting a 30% penetration of EVs in its portfolio by FY27. 

“M&M has made impressive strides in the (personal vehicle) segment, gaining 170 bps share in FY24 to 10.9% (9.2% in FY23). With new refreshes and BEV model launches, expect M&M to grow ahead of the industry," Elara Securities (India) said in a report.

SUVs driving growth

M&M at its investor day event highlighted that despite ramping up production, its order book continues to remain healthy. This was evident last month when the company received more than 50,000 bookings in just 60 minutes for its new sub-compact SUV—XUV 3XO. The flip side to this, however, is that many of its variants have long waiting periods, leading to customer dissatisfaction. 

To overcome this, M&M is boosting its production and has planned for capital expenditure and investments of ₹27,000 crore over FY25-27. Its SUV production capacity is projected to increase from 49,000 units per month now to 64,000 units by in FY25 and 72,000 units by the end of FY26.

Also read | Mahindra & Mahindra in the fast lane on higher capex, upcoming launches

While the management sounds confident, investors should note the growing competitive intensity in the SUV space, with companies like Maruti Suzuki, Tata Motors and the IPO-bound Hyundai India lining-up a slew of launches.

Trucks and tractors

In the light commercial vehicles segment, M&M has a market share of about 49%, which it seeks to bolster with seven launches by FY30. It is also looking to more than double its market share in trucks and buses to 7-8% in the next five years with new launches.

In the tractor segment, the management expects volumes to grow by 5-6%, driven by forecasts of above-normal rains this monsoon and the success of its new launches. Tractor count in India is projected to jump to 17 million units by 2030 from 8 million now. 

Also read | Mahindra set to drive in its first electric truck in 2025

This would be backed by growing farm mechanization and consistent increase in cropping intensity, which presents a huge headroom for growth. M&M had a market share of around 41% in the domestic tractor market in FY24.

A new high

The M&M stock hit a new 52-week high of ₹3,013.50 per share on 18 June. In this calendar year so far, the stock has rallied 74%, outperforming the Nifty Auto index’s growth of about 36% by a wide margin. 

Lately, performance in M&M key segments has improved and the company has prioritized prudent capital allocation practices. This had aided sentiment towards the stock. 

If everything plays out as per plan, M&M’s earnings growth could get a boost. Some brokerages have already raised their estimates on M&M’s earnings-per-share for FY25 and FY26.

But the sharp rise in share price has pushed the company’s price-to-earnings multiple to around 30 times, much higher than its 10-year average of 20 times, show Bloomberg data. This might limit the stock’s near-term gains. 

According to Motilal Oswal Financial Services, M&M’s re-rating drivers include strong demand momentum in utility vehicles, long-term growth opportunity in tractors, and solid progress in its ‘growth gems’, which can emerge as future value-unlocking drivers.