CLSA has upgraded shares of Mahindra & Mahindra Ltd (MM: IN) (OTC: MAHMF) from Underperform to Hold, adjusting the price target to INR2,654.00 from the previous INR2,636.00. The upgrade on Thursday follows Mahindra & Mahindra's first-quarter financial results for the fiscal year 2025, which met CLSA's forecasts.
The company reported a 12% year-over-year increase in standalone revenue and a 23.2% rise in profit after tax (PAT), once the gains from the previous year's sales of KG Mobility and MCIE were excluded.
The firm noted that the average selling price (ASP) for Mahindra & Mahindra's products grew by 9.2% year-over-year, primarily due to a richer product mix. The increase also reflects the exclusion of three-wheeler volumes, which were not accounted for following the demerger of Mahindra Electric Mobility Ltd (MLMML) in September 2023.
The demerger has led to a more streamlined product portfolio for the company.
The positive adjustments in Mahindra & Mahindra's financial metrics were partly attributed to the successful launch of the XUV 3XO, which helped the company increase its market share in the competitive SUV segment. This launch is seen as a contributing factor to the company's robust performance and its improved positioning in the market.
CLSA's revised price target of INR2,654.00 represents a minor increase from the previous target but signals a shift in the firm's outlook on the stock. The new Hold rating suggests that CLSA believes the stock is now fairly priced, taking into account the recent financial performance and market dynamics.
InvestingPro Insights
MAHM, a prominent player in the Automobiles industry, has demonstrated financial resilience and strategic market positioning. With a market capitalization of $37.62 billion, MAHM's size speaks to its significant role within its sector. Despite analysts anticipating a sales decline in the current year, the company's revenue growth over the last twelve months, as of Q1 2025, stands at a solid 12.56%. This indicates a sustained ability to expand its revenue streams in a challenging economic landscape.
InvestingPro Tips highlight that MAHM has not only maintained dividend payments for 24 consecutive years but has also raised its dividend for the past four years, showcasing a commitment to returning value to shareholders. Moreover, the company has achieved a high return over the last year, which could be an attractive point for investors seeking robust performance in their portfolios.
While MAHM is trading at a high P/E ratio of 28.53 relative to near-term earnings growth, suggesting a premium valuation, it is important to consider this in the context of its consistent profitability and the high returns it has delivered over various time frames. For those considering an investment in MAHM, additional InvestingPro Tips, which delve into the company's moderate level of debt and its performance relative to industry benchmarks, can be found at https://www.investing.com/pro/MAHM.
In terms of profitability, the company's gross profit margin for the last twelve months as of Q1 2025 is a healthy 40.17%, indicating efficient cost control and a solid competitive edge in its manufacturing operations. With an EBITDA growth of 18.6% for the same period, MAHM is showing an improving operational efficiency and earnings potential.
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