Target: ₹1,930

CMP: ₹1,527

Mahindra & Mahindra’s Q1-FY24 revenue and margins beat BNP Paribas estimates and Bloomberg consensus estimates (BBGe). M&M’s commitment to capacity expansion for SUVs is on track, with semiconductor shortages no longer being a material headwind. MM is gaining market share in both SUVs and tractors and is confident of further gains in FY24 through product launches.

M&M’s new monthly SUV bookings (48k) remain way ahead of its billings (33k) but are in line with the target capacity (49k) by end-Q4-FY24. Q1 retail sales volume being below wholesale by 10 per cent, inventory normalising to 30 days and Maruti Suzuki India’s sharp SUV production ramp-up are concerns. That said, better-than- expected Automotive margin expansion and a strong order book give us visibility on strong FY25 earnings growth.

M&M’s investment in RBL Bank is strategic and to understand the banking business. It has no intention to raise stake or taking a board seat in the near term. The board also approved a scheme to merge MHEL, MTWL and TCL with MM.

We also see material value unlocking if Auto and Farm businesses are listed separately. We raise our FY24-26E EPS by 1-8 per cent to bake in Q1-FY24 results and nudge our target price up by 0.5 per cent.