M&M stock hits new high as m-cap nears Rs 4 trillion; zooms 100% in 10 mths

In three days, the stock of the Mahindra group automaker has rallied 11 per cent on reports of the top management of Skoda Volkswagen India looking to sell up to 50 per cent stake in the co to M&M.

Mahindra & Mahindra (M&M) shares continued their upward journey to hit a new high of Rs 3,098, gaining 2 per cent on the BSE on Tuesday’s intra-day trade.

In three days, the stock of the Mahindra group automobile manufacturer has rallied 11 per cent on reports of the top management of Skoda Auto Volkswagen India, looking to sell up to 50 per cent stake in the company to M&M.

On Monday, September 24, the company in an exchange filing, said Mahindra and Volkswagen Group continue to explore multiple opportunities to expand their collaboration potential.

"In case there are any concrete outcomes with regard to any of the aforementioned discussions, appropriate disclosures will be made in a timely manner as per the norms under the Listing Regulations," M&M said while clarifying in an exchange filing regarding reports that Skoda India was in talks with the company for a stake sale.

Meanwhile, in the past 10 months, the stock price of M&M has doubled or zoomed 100 per cent from the level of Rs 1,552.70.  A sharp rally in the market price of M&M has seen the company’s market capitalisation (market cap) inch towards the Rs 4-trillion mark.

M&M’s market cap hit Rs 3.85 trillion in intra-day trade today, which is less than 4 per cent away from the Rs 4-trillion mark.

On February 16, 2024, Volkswagen Group and M&M had signed the first supply agreement on components of Volkswagen´s MEB for Mahindra’s purpose-built electric platform INGLO, taking a definitive step ahead on their joint vision for e-mobility collaboration. 

The deal covers the supply of certain electric components as well as unified cells. With the agreement, Volkswagen and Mahindra are further deepening their collaboration that started with a partnership deal and a term sheet in 2022. Both companies will continue to evaluate potential expansion of their collaboration.

M&M has a diversified business profile with its presence spread across various businesses, including farm equipment, auto, defence, information technology, financial services, mobility services, renewable energy, logistics, real estate, hospitality, steel trading, automotive components and maintaining parts for leading aerospace companies. However, farm equipment and auto businesses together are the key revenue and profitability drivers for it.

The demand drivers for the auto segment (gross domestic product growth rate, disposable income, fuel prices, level of industrial production, interest rates) are different from those for farm equipment (adequacy of rainfall, interest subvention schemes, cost of labour in rural areas).

Thus, the demand cycles for products of the two divisions are not completely dependent on each other. Within these two divisions, the company has a wide range of product offerings at various price points to cater to different customer segments, according to India Ratings and Research (Ind-Ra).

M&M is planning to launch nine internal combustion engine sports utility vehicles (SUVs, including three refreshes) and seven electric vehicles (EVs) by FY30. Its new product launches and increasing production capacity would support the company’s growth in the auto segment.

The company also has a strong order book and is planning product refreshes under its new strategy, including EVs over the medium-term, leading to a boost in its market share, the rating agency said in its note.

Meanwhile, analysts at ICICI Securities have a ‘Buy’ rating on M&M, with a target price of Rs 3,349 per share.

With a favourable monsoon, H2FY25 (October to March) is expected to see better growth and growth for FY25 could be higher than 5 per cent as guided earlier. Exports were up 45 per cent year-on-year (Y-o-Y) in Q1 at 4,500 units.

Despite muted growth in the end market, exports showed strong growth, and was partly driven by reallocation of the supply chain from other partners. The brokerage firm builds in approximately 6 per cent volume growth for the domestic tractor industry in FY25E, followed by a 15 per cent growth in FY26E.