M&M rallies 9% in 3 days on healthy outlook; market cap crosses Rs 4 trn

Backed by the positive farm sector sentiment and better terms of trade, the tractor segment is expected to report healthy volume prints, according to analysts

Shares of Mahindra & Mahindra (M&M) hit a new high of Rs 3,270, gaining 3 per cent on the BSE in Tuesday’s intra-day trade on a healthy business outlook. The stock surpassed its previous high of Rs 3,237.60 touched on January 3, 2025.

 

Since February 1, post Budget 2025-26, the stock of the automobile company has rallied 9 per cent. It is quoting higher for the eighth straight trading day, having surged 17 per cent during the same period. In comparison, the BSE Sensex was up 2.2 per cent during the period.

 

A sharp outperformance has seen the market capitalisation of M&M cross the Rs 4-trillion mark. At 09:42 AM, with a market capitalisation of Rs 4.0 trillion, M&M was trading 1.5 per cent higher at Rs 3,217.65 on the BSE.

 

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.

 

M&M continued with its outperformance in the domestic passenger vehicle (PV) space, with total sales growing 17.6 per cent year-on-year (YoY), to 50,659 units in January 2025. In the tractor segment, M&M reported volumes of 27,557 units, up by 15 per cent YoY.

 

Backed by the positive sentiment in the farm sector and better terms of trade, the tractor segment is expected to report healthy volume prints with FY25E industry growth expected at high single digit, according to analysts.

 

Better soil moisture levels due to the above normal southwest monsoon and high-water storage levels in major reservoirs have aided in an increase in Rabi sowing. Further, continued government support on various rural schemes and on Agri subsidies are positives that may boost tractor demand going forward, according to the management.

 

Meanwhile, the government has announced the biggest ever overhaul in personal income tax structure, thereby increasing the tax exempt income from Rs 7 lakh to Rs 12 lakh in the Union Budget 2025-26. This tax relief is expected to increase the disposable income, between the range of Rs 30,000 and 110,000, in the hands of taxpayers, thereby providing a big booster for the auto space given people will upgrade their standard of living by potentially buying new vehicles which can either be a 2-wheeler or PV, ICICI Securities said.

 

Further, a better outlook for the rural segment and the coming of Chaitra Navratri in March-end 2025 would support tractor sales in Q4FY25. Even though the domestic PV industry saw a moderation in growth, we have been arguing that M&M would outperform the PV industry led by new launches and capacities, Mirae Asset Sharekhan said.

 

Historically, M&M’s operating performance has largely depended on the tractor segment. However, the brokerage firm believes that the automobiles segment would substantially contribute to profitability in the coming period. Mirae Asset Sharekhan maintains 'Buy' rating on the stock with an SOTP-based revised price target of Rs 3,600, due to healthy traction in its PV segment, market leadership in the tractor segment, opportunity to grow in the farm machinery segment, and its roadmap to play in the electric vehicle (EV) space.