📈 Fed's first cut since 2020: Time to buy the dip? See Tech-focused stock picksUnlock AI Picks

UBS downgrades Mahindra & Mahindra stock on valuation concerns

EditorEmilio Ghigini
Published 07/26/2024, 03:16 AM
© Reuters
MAHM
-

On Friday, UBS downgraded shares of Mahindra & Mahindra Ltd (MM:IN) (OTC: MAHMF) stock, adjusting the rating from Buy to Neutral, despite increasing the price target to INR3,000.00 from INR1,850.00.

The revision follows a period of significant growth for the Indian automaker, which has seen its share price soar, leading to a valuation that UBS now considers stretched.

The company, known for its sports utility vehicles (SUVs), tractors, and light commercial vehicles (LCVs), has been experiencing industry-leading growth volumes. UBS acknowledges the company's market share gains, propelled by recent product launches. However, the firm anticipates that these gains will continue at a decelerated pace.

UBS's new price target represents a 7% increase over the current share price. The firm's reassessment is partly due to Mahindra & Mahindra's auto business trading more than four standard deviations above the five-year average. This surge in stock price has prompted UBS to adopt a more cautious stance on the company's market valuation.

The company's strategy towards emission compliance is heavily reliant on electric vehicles (EVs). Currently, the EV off-take is approximately 2.5% of the industry and close to 2% of Mahindra & Mahindra's SUV sales. UBS expresses concern over the company's ambitious EV-only approach, considering the modest adoption rate.

According to the management of Mahindra & Mahindra, a 20-30% adoption of EVs is necessary by 2027 to meet the proposed corporate average fuel economy (CAFÉ) norms.

UBS's position reflects a careful analysis of Mahindra & Mahindra's current market performance and future compliance challenges. The firm's adjustment of the price target upwards, despite the downgrade, indicates a recognition of the company's solid growth but tempered by the risks associated with its EV strategy and the recent rapid rise in its stock price.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.