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M&M dips over 6%; Should investors buy, sell or hold?

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The automobile major M&M and Mahindra Vehicular Manufacturing (MVML) on Friday had reported a combined net profit of Rs 163 crore for the quarter ended March 2021 as compared to a net loss of Rs 3,255 crore in the year-ago period.

M&M dips over 6%; Should investors buy, sell or hold?
Shares of Mahindra & Mahindra (M&M) corrected over 6 percent in early trade on Monday on profit-booking as the auto major kept conservative guidance for the tractor industry despite reporting a profitable quarter. Meanwhile, brokerages remained mixed on outlook and set modest price targets on the M&M stock amid persisting pandemic woes.
M&M and Mahindra Vehicular Manufacturing (MVML) on Friday had reported a combined net profit of Rs 163 crore for the quarter ended March 2021 as compared to a net loss of Rs 3,255 crore in the year-ago period.
M&M and MVML’s combined revenues during the quarter increased 48 percent to Rs 13,338 crore from Rs 9,005 crore, YoY.
M&M gave conservative guidance for the tractor industry. The management said the tractor industry will grow in the low single digits in FY22. This compares to the 28 percent growth in FY21.
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Global brokerage firm CLSA increased its core EPS estimates for FY22-23 by 3 percent-5 percent and raised the target price to Rs 1,090 percent from Rs 1,060 earlier and maintained its 'buy' rating.
“Mahindra’s (M&M) 4QFY21 results were above expectations due to better-than-expected margins for the farm and auto segments. Its FY22-24 guidance on the capital deployment of Rs 170 billion was a tad higher than what the market was anticipating. However, management maintained its medium-term ROE goal of 18%,” CLSA said in a report.
M&M is also part of CLSA’s India focus list.
UBS maintained a buy call on the stock on improving return profile and strong outlook. It has set a target price of Rs 1,030 per share. M&M’s Q4 results were in line with UBS estimates.
The international automobile and farm equipment segment (FES) will break even by FY23, while capex will limit meaningful FCF generation, UBS said.
Goldman Sachs also has a buy rating on M&M with a target of Rs 993 per share. It said that the company’s Q4 earnings were in line with expectations and focused on the long term. The margin was up 83 bps YoY, underscoring robust cost controls.
M&M is UBS’s preferred pick in the PV/CV space with valuations attractive at current levels.
However, Phillip Capital has downgraded M&M to ‘sell’ and lowered the FY22 and FY23 estimates on the back of the conservative tractor guidance as well as the raised capital allocation plans.
ICICI Direct has a positive stance on M&M due to its focus on prudent capital allocation, healthy growth plans and EV proactiveness. It retained buy with an unchanged target price of Rs 1,000 per share.
At 10:00 am, the shares of M&M were trading 6.10 percent lower at Rs 794.60 apiece on the BSE.