M&M rallies 19% in four days, hits fresh 52-wk high on strong tractor sales

Shares of Mahindra & Mahindra hit a fresh 52-week high of Rs 893 on the BSE aftre rallying 7 per cent on Thursday. The stock has surged 19 per cent in the past four days after reporting strong tractor sales volume of 35,000 units for January 2021, up 50 per cent over the same month previous year. The stock is 10 per cent away from its all-time high level of Rs 992, touched on August 30, 2018.

At 10:37 am, M&M was trading 5 per cent higher at Rs 877 on the BSE, as compared to 0.4 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 8.7 million equity shares changing hands on the NSE and BSE.

The tractor demand continues to be strong with expansion in Rabi acreage, very high reservoir levels and higher liquidity in the hands of farmers with timely Kharif procurement. The management expects demand to remain robust on account of these factors and Government’s focus on agriculture & rural sector.

With low channel inventory, the brokerage firm expects this segment to continue to report robust numbers, going forward. Tractor remains the only segment in the automobile space, which has clocked double digit growth on year to date fiscal year basis with some other segments still down in double digits.

Brokerage firm Emkay Global Financial Services has retained its positive view on M&M's management’s efforts to tighten capital allocation norms and expectations of sales cycle recovery.

“Steps taken to improve capital allocation in recent quarters are noteworthy – divestment efforts of Ssangyong, shutting down operations of Genzee, halting of investment plans in Mahindra Automotive NA, divestment of First Choice Services, closure of Gipps Aerospace and cancellation of Ford JV. Key risks are rising competition, failure of new products, increasing losses in subsidiaries and adverse input commodity prices,” the brokerage said in company update.