Brokerage firms are betting on Mahindra & Mahindra as the stock one should look out for. This is because Mahindra has been growing consistently over the years, has witnessed double digit growth in the last few years, has created fabulous cars and tractors for customers, and has worked on reducing costs and increasing margins. Here's how M&M has grown and why you should bet on them:
M&M share price: Mahindra and Mahindra (M&M) was one of the first few companies that got listed on the stock exchange on Jan 1, 1999 at a mere Rs 20.75 per share. Since then, here's how the prices have moved so far:
The prices have moved by about 6,000% in all these years and by 38% in a year. If you had invested in M&M just a year back in November 2021, your investment value would have grown by a whopping 54%. The company has grown multi folds in the last few years and it recently reported its highest ever quarterly standalone and consolidated revenue. Here's a few reasons why its growing and is set to grow at a fast pace:
The expected price target: Nomura has put a price target of Rs 1616 whereas Goldman Sachs has estimated that the price will rise to Rs 1640 per share.
So how did M&M grow at such a fast rate?
1. People have historically loved M&M's passenger vehicles and farm equipment: M&M's net profit this year was Rs 2,090 crore, which is 46% more than last year's profit of Rs 1,433 crore. M&M also sold 75% more vehicles this year as compared to the last year. As of November 1, 2022, they have 2.60 lakh bookings for their SUVs that are yet to be delivered to customers. This includes 13,000 units of the XUV300, 20,000 units of the Thar, 13,000 units of the Bolero family, 80,000 bookings for the XUV700, and 1.30 lakh bookings for the new Scorpio-N.
2. New 2022 models did fabulously well: M&M launched cars like Scorpio-N in June 2022 which turned out to be a blockbuster hit for M&M. The Scorpio-N clocked over 1 lakh bookings worth Rs 18,000 crores within 30 minutes on the first day itself. Though the product is quite popular, M&M is yet to deliver over 1.30 lakh units of the Scorpio-N and Scorpio Classic.
3. Increasing production capacity: Since M&M has seen a strong demand for its vehicles and also had customers experiencing a long waiting time, M&M is expanding its production capacities. M&M had a manufacturing capacity of 29,000 SUVs per month from January to March 2022. But they expect to grow it to 39,000 SUVs per month by March 2023 and to 49,000 SUVs per month by March 2024.
4. Increased margins in the automative business: M&M's margins increased from 3.7% to 6% in the automative sector because they cut fixed costs with various cost reduction initiatives, ended the introductory pricing for Thar and XUV 700, and witnessed growth through operative leverage. M&M's tractor sales in the festive season were up by nearly 10% year-on-year (y-o-y) and their market share in tractors was 41.4% in FY23 till October.