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M&M in fast lane: Stock hits record high to become top Nifty 50 gainer after XUV 3XO launch
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Mahindra’s XUV 3XO bookings will open online and simultaneously at Mahindra dealerships from May 15, and the deliveries will commence from May 26.
Mahindra and Mahindra shares touched a record high on April 30, a day after the carmaker unveiled its compact sports utility vehicle (SUV) XUV 3XO.
M&M shares rallied 5% to ₹2,169 on the NSE and became the top Nifty 50 gainer. The carmaker’s stock also outperformed the sectoral index Nifty Auto which traded 2% higher.
In the past year, the stock has given a return of 75% to its investors as against the benchmark Nifty 50 which has risen 25% during the period. The market capitalisation of M&M has now hit ₹2.67 lakh crore.
What are the reasons behind the M&M stock rally?
1) Tuesday’s surge in the auto stock comes a day after Mahindra unveiled the XUV 3XO, a facelift of the 2024 XUV300, with prices starting from ₹7.49 lakh (ex-showroom). The new model, available in five trims, features a significantly revamped design, a new cabin, an array of added features and an updated automatic gearbox.
The Street seems to have liked the pricing of the facelift vehicle which is quite competitive
pricing across variants ranges from ₹7 lakh to ₹15 lakh.
2) The utility vehicle segment is a high growth segment in which M&M is strengthening its position. In fact, the compact SUV segment constitutes 50% of UV volumes and 30% of overall four wheeler volumes. M&Ms market share in the UV category increased from the lows of ~8% in FY21 to 16.3% in FY24.
3) Brokerages are bullish on the stock.
Nomura is of the view that the XUV 3XO launch has the potential to double sales. It believes M&M is offering several best-in-class features in this facelift and has the potential to increase sales by 50-100% which is 6,000-8,000 per month.
It has maintained M&M as its top pick in the OEM space and added that new products should continue to drive re-rating from current levels of 10.5x FY26F EV/EBITDA, which is below peers at 15x EV/EBITDA.
Investec too said that M&M is its top pick in the auto OEM space due to its strong earnings momentum that is driven by successful product launches. The core valuation of 20x FY26E EPS is also attractive, it said and reiterated its buy stance on the stock.
M&M sales trend in the past months
M&M UV monthly sales have seen consistent growth over the last 10 months, rising from 36,205 in June 2023 to 40,631 units in March 2024.
June 2023: 32588
July 2023: 36205
August 2023: 37270
Sep 2023: 41267
Oct 2023: 43708
Nov 2023: 39981
Dec 2023: 35174
Jan 2024: 43068
Feb 2024: 42401
Mar 2024: 40631
‘3XO is a disruptor product’
At the unveiling event on April 29, M&M Executive Director and CEO for auto and farm director Rajesh Jejurikar told CNBC-TV18, “3XO is a disruptor product. We tried to excel in every dimension… XUV 3XO comes with many segment-first features and aggressive pricing.”
He said the firm launched three SUVs in the past that have made the carmaker a number SUV player in the industry in terms of revenue market share. Earlier, M&M wasn’t successful in the compact SUV segment and over the next two to three years, the company wants to attain the top spot in the compact SUV segment as well, he said.
The bookings for XUV 3XO will open online and simultaneously at Mahindra dealerships from May 15, the company said while the deliveries will commence from May 26.
M&M shares traded 4.85% higher at ₹2,162 on NSE at 1:27 am.
Track latest stock market updates from CNBCTV18.com’s blog
With inputs from Daanish Anand
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