Mahindra & Mahindra Surges 3% on Stellar Q1 Earnings; Analysts Pinpoint Auto and EV Growth as Key Drivers

Mahindra & Mahindra Surges 3% on Stellar Q1 Earnings; Analysts Pinpoint Auto and EV Growth as Key Drivers​

Mahindra & Mahindra (M&M) shares saw a strong uptick in the market, climbing as much as 3% to reach Rs 3,365 on the BSE on Friday. The surge followed the announcement of robust first-quarter results for the SUV major. M&M reported a 7% year-on-year (YoY) rise in standalone net profit for the June quarter.

The company's revenue from operations grew by a substantial 23% YoY, reaching Rs 41,920 crore. This growth was reflected as standalone profit stood at Rs 3,685 crore compared to Rs 3,450 crore in the corresponding quarter last year.

Analyst Viewpoints: Valuations and Upside Potential​

The company’s strong performance has led several brokerage firms to maintain positive ratings and target significant future upside. Morgan Stanley maintained an Overweight rating on M&M shares. They set a target price of Rs 4,222, suggesting an upside potential of 29% from current levels.

Motilal Oswal reiterated its Buy rating, raising the target price to Rs 4,108, which translates to a potential upside of around 25%. The brokerage noted that earnings beat their estimates, primarily aided by higher-than-expected other income.

Nuvama also maintained a Buy rating on M&M with a target price of Rs 3,900, offering an upside of 19% from present levels. Nuvama believes the auto business will remain the primary growth engine for the company.

Sector Growth Guidance and Future Outlook​

Management provided specific growth guidance across various segments for FY27 based on consumer sentiment and product strength. They guided mid single-digit growth in the tractor industry. For utility vehicles, the forecast is mid to high teens growth. The light commercial vehicle (LCV) industry is expected to see high single-digit growth.

Motilal Oswal projects a strong CAGR for M&M over FY26-28, forecasting around 16% for revenue, 13% for EBITDA, and 14% for profit after tax (PAT). This outlook reflects the anticipated performance across all business lines.

Nuvama highlighted the positive response to recent launches, such as the XUV 7XO and XEV 9S. The brokerage anticipates a 16% CAGR in the auto segment revenue over FY26-28E. M&M also plans significant future expansion, including introducing 10 ICE models (nine new launches plus one refresh) and six EVs by 2031.

Farm Business Resilience and Market Position​

The farm equipment division delivered a strong quarter, supported by improved tractor volumes and market share gains. Tractor volumes increased by 18% YoY to reach 1.58 lakh units. M&M maintained its leadership in the tractor sector with a consolidated market share of 44.9%.

Rajesh Jejurikar, Executive Director and CEO for Auto and Farm Sector, noted that both auto and tractor businesses demonstrated resilience during the quarter. He added that the company saw a 50 basis point sequential increase in SUV revenue market share. Furthermore, M&M recorded a 150 basis point sequential rise in volume market share within the light commercial vehicle segment below 3.5 tonnes.

Electrification and Structural Shifts​

Nuvama noted that while farm revenue growth is expected to moderate to a 4% CAGR over FY26-28E following a strong 25% increase in FY26, battery electric vehicles (BEVs) are seen as the future driver. Nuvama expects BEV volumes to hit 90,000 units in FY27E and 122,000 units in FY28E. This transition is critical for the company to meet the upcoming CAFE 3 norms.

Nuvama also views the transfer of the Mahindra Trucks & Buses division to its subsidiary SML Mahindra as a medium-term positive. The brokerage cited this move as offering benefits through faster product development and operating synergies at scale.