M&M gains 4% as Company to increase prices of PVs, CVs from January 1

Shares of Mahindra & Mahindra (M&M) rose 4 per cent to Rs 744 on the BSE in early morning trade on Wednesday after the company announced that it will increase the price of its passenger vehicles (PVs) and commercial vehicles (CVs) from January 1, 2021, in order to partially offset the impact of rise in input costs.

M&M said the price hike has been necessitated due to the increase in commodity prices and various other input costs. "Details of the price increase across different models will be communicated in due course," it said.

The stock had hit a 52-week high of Rs 764 on December 8. It has underperformed the market by falling 2 per cent in past one week, as compared to a 1 per cent rise in the S&P BSE Sensex. In the past one month, the stock rallied 17 per cent, against a 6.7 per cent gain in the benchmark index.

Meanwhile, India Ratings and Research (Ind-Ra) expects the cash flow from operations for FY21 to be Rs 20 billion-25 billion, and to recover to the FY19 levels of around Rs 80 billion in FY22-FY23 on the back of a recovery in the operational performance. Free cash flow (FCF) is likely to be negative Rs 10 billion-15 billion in FY21. Furthermore, during 1HFY21, M&M invested Rs 19 billion into subsidiaries including Rs 16.4 billion in a rights issue of Mahindra & Mahindra Financial Services. FCF is likely to turn positive only in FY22, the rating agency said in a rating rationale.

Analysts at Prabhudas Lilladher reiterates BUY on M&M (MM) led by positive rural sentiments and stable tractor outlook providing margins and cash-flow cushion to compete in utility vehicles (UV) business, renewed focus to gain back lost market share in UV business with new product launches, dominating presence in LCVs to help ride CV upcycle and increased focus on capital allocation with the exit of non-core business like GenZ, USPS (MANA) and Gipps Aerospace (aircraft manufacturing) in 1HY21.

However, key factors such as increased competition in UVs led by new entrants and feedback on newly launched passenger UVs are to be watched, the brokerage firm said in a company update.