MM share price up 2% after CLSA retains #39;buy#39;

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CLSA has forecast FY22/23 tractor industry growth of 8 percent/2 percent on an FY21 base of 25 percent. It is of the view that SUV launches and a cyclical recovery in light commercial vehicles should drive the auto segment margin.

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Mahindra and Mahindra (M&M) share price gained 2 percent in the morning session on March 18 after brokerage house CLSA maintained a “buy” call with the target at Rs 1,150 a share.

The global research firm, however, cut FY21-23 core EPS by 3-7 percent to factor in volume losses due to chip shortages.

The brokerage has forecast FY22/23 tractor industry growth of 8 percent/2 percent on an FY21 base of 25 percent. It is of the view that SUV launches and a cyclical recovery in light commercial vehicles (LCV) should drive auto segment margin.

The stock was trading at Rs 853.70, up Rs 16.95, or 2.03 percent at 0940 hours. It has touched an intraday high of Rs 856.85 and an intraday low of Rs 839.95.

In February, the auto major’s total sales were down 11.4 percent at 28,777 units against 32,476 units (YoY), while monthly figures were down 26.5 percent at 28,777 vehicles against 39,149 units in January.

Tractor sales were, however, up 25 percent at 28,146 units against 22,561 units (YoY). Domestic tractor sales rose 24 percent at 27,170 units against 21,877 units (YoY). Tractor exports jumped 43 percent at 976 units against 684 units (YoY). Total tractor sales were down 19.1 percent at 28,146 units against 34,778 units (MoM).

Passenger vehicle sales jumped 41 percent at 15,391 units against 10,938 units (YoY). Three-wheelers were down 39 percent at 2,357 units against 3,843 units (YoY).

Exports were down 1 percent at 1,827 units against 1,839 units (YoY). Total auto sales was down 26.5 percent at 28,777 units against 39,149 units (MoM).

Goldman Sachs had maintained a “buy” rating on the stock, with a target of Rs 1,029 per share. It is of the view that the third quarter earnings were above estimates and auto is geared for recovery, adding that beat continued on the consolidated front as well. Also, Nomura retained a “buy” on the stock with a target of Rs 1,165 a share.

Domestic brokerage firm ICICIdirect,¬†too, has a “buy” call on the stock but with the target of Rs 1,000. “We value the stock at Rs 1,000 per share on SOTP basis (8.5x FY23E EV/EBITDA for base business; 20 percent holding company discount to its investments),” it said.

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