M&M reclaims Rs 1-trn m-cap mark as stock surges 5%, hits over 2-yr high

The stock rallied 5% to Rs 817, its highest level since October 2018.

Mahindra & Mahindra on Wednesday regained the market-capitalisation (market-cap) of Rs 1-trillion after the firm's stock hit an over two-year high of Rs 817, surging 5 per cent on the BSE.  At 11:39 am, the company had a market-capitalisation of Rs 1.01-trillion, BSE data shows.

The stock of car and utility vehicles company was trading at its highest level since October, 2018. It hit a record high level of Rs 992 on August 30, 2018.

Thus far in the month of January 2021, M&M stock has soared 13 per cent after the company increased price in the tractor segment across models; and personal & commercial range of vehicles due to the increase in commodity prices. The management said the price increase was necessitated due to the unprecedented increase in commodity prices and various other input costs over the past many months.

In another development, M&M and Ford Motor Co have called off their joint venture (JV). As part of the JV, Ford was to cede most of its Indian operations to M&M. The companies attributed the decision to changes in global economic and business conditions caused, in part, by the global Coronavirus (Covid-19) pandemic since the agreement was first announced.

Analysts believe the decision of calling off JV between M&M and Ford is positive given very limited scope for new product development along with sourcing related synergies. "In fact, amount saved from not investing (envisaged to be Rs 1,400 crore) can now be better utilized in their SUV (sport utility vehicle) and EV (electrical vehicle) segment," analysts at Prabhudas Lilladher said.

On the other hand, with SsangYong (SYMC) now under autonomous restructuring support (ARS), M&M is confident to strike a deal with potential investor by February end. "We are assertive on M&M as management has again reinforced investors that capital allocation remains the key focus (target RoE of >18). On the auto side, M&M plans to sharpen focus on its core SUV products and succeed in establishing a strong presence in EV as well," the brokerage firm said in event update. It reiterates 'buy' rating on M&M with revised SoTP based price target of Rs 851 (v/s Rs826, largely led by increase in subs value).

"On the automotive side, M&M's plans to sharpen focus on its core SUV products and succeed in establishing a strong presence in electrics as well. We believe continued product success (post Thar’s performance) would be critical in re-energizing its channel and create a wow factor for its customers," analysts at ICICI Securities said. The brokerage firm maintains 'buy' rating on the stock with target price of Rs 881.