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Reliance Securities
M&M (Buy)
CMP: ₹937.05
Target: ₹1,085
We expect M&M to sustain the ongoing positive momentum on the back of the government’s strong rural thrust coupled with the near-normal monsoon. As M&M’s key product portfolio continues to be rural-focussed, it would continue to enjoy the benefits of improving rural affordability.
Though M&M’s present product line in the automotive segment is lean, its recent launch of Marazzo coupled with expected new launches (S201 and Y400) in the upcoming festive season would help regain lost market share to some extent. Moreover, the company plans to focus on new technology and EV platform, going forward.
Looking ahead, we expect M&M’s volume to clock 13 per cent CAGR over FY18-FY20 led by strong demand for UVs and new launches.
Considering expected improvement in rural demand, strong product pipeline, and attractive valuation, we reiterate our ‘buy’ recommendation on the stock with an SOTP-based target price of ₹1,085 (valuing M&M+MVML at 8x FY20E EBIDTA at ₹773 and subsidiary at ₹312 post-20 per cent discount to market-cap.)
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