Prabhudas Lilladher

M&M (Buy)

CMP: ₹755

Target: ₹895

Mahindra & Mahindra Ltd is engaged in the manufacture of passenger cars, commercial vehicles and tractors.

M&M’s volumes continue to be driven by strong demand in tractors and a cyclical recovery in the LCV segment. The UV business continues to be a drag with M&M losing about 14 per cent market share over the last three years. However, given the extremely low base, upcoming model launches (MPV/Mahindra branded Tivoli) and refreshes (KUV1oo/TUV3oo) should boost volume growth for M&M over FY19E.

Increased government focus on rural economy could further accelerate growth for both, farm and auto segment. The stock has underperformed Nifty by about 5 per cent over the last 12 months and currently trades at 15x FY19 core Auto PE.

We upgrade our rating to ‘Buy’ from ‘Accumulate’ with a target price of ₹895 (earlier ₹790).

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