Why M&M Share Price is Rising

Anand Mahindra, the chairman of Mahindra Group, couldn't contain his happiness when last week the Scorpio hit a production benchmark of 900,000 units!

He explained in a tweet how he owed his success to this glorious SUV. The SUV single-handedly changed the brand perception of Mahindra.

Little wonder that the M&M share price surged 6.5% in the last five trading sessions.

But the M&M share price was on an upward trajectory long before Scorpio hit the benchmark production level.

In 2023 so far, it has rallied 24%.

Let us find out what factors drove the rally...

#1 Healthy sales update

Mahindra & Mahindra (M&M) reported a 21% increase in domestic passenger vehicle sales at 32,588 units in June 2023, as compared to June last year. The company sold 26,880 units of passenger vehicles in June 2022.

M&M announced that its domestic sales of utility vehicles were at 32,585 units last month, as against 26,620 units in the year-ago period, a growth of 22%.

SUV volumes were restricted by a short-term disruption in engine-related parts at the supplier end. The constraints on semiconductor-related parts like airbag ECU continued during the month too.

Sales of three-wheelers, including electric 3-wheelers, were at 6,377 units, as compared to 4,008 units in June 2022, a growth of 59%.

The waiting period for the SUV in India was recently reduced from the previous 48 months to 40 months which worked well for the company.

#2 Strong financial performance

For the financial year 2023, M&M reported total revenues of Rs 1,212.7 billion (bn) up 34% on a YoY basis on the back of new vehicle launches and rising order books.

Automotive led the way in revenue growth with 62% growth. Driven by strong execution of launches and an improvement in supply chain-related issues.

M&M posted an all-time high record annual net profit of Rs 102.3 bn, up 56%. This was driven by successful mega launches in automotive, steady growth at farm equipment, strong operating performance at financial services and value unlock through monetisation/partnerships.

M&M FY23 Performance

Particulars	FY23	FY22	Growth (%)
Total revenues (Rs in bn)	1,212.7	901.7	34
Profit after tax (Rs in bn)	102.8	65.8	56
Total Vehicles sold (units)	698,456	465,601	50

Source: Company, Equitymaster

In FY23, the company regained its position of number one in SUV. It also had the largest share in tractors by a big margin.

It has a 45% market share in large commercial vehicles (LCVs). It is also a market leader in electric three-wheelers.

#3 Rapid product launches

On 16 June 2023, the company launched its flagship XUV 700 SUV in Australia as part of its global expansion strategy.

The SUV is priced at US$ 36,990 (about Rs 3,035,639) in Australia for the AX7 variant. The model is priced at Rs 2,056,300 in India which means it costs nearly Rs 10 lakh more in Australia owing to custom duties and taxes.

On 8 June 2023, M&M announced that it has entered the dual-fuel segment in the small commercial vehicle space with the launch of Supro CNG Duo priced at Rs 6.3 lakh. The model can run on both CNG and petrol.

It comes with a payload capacity of 750 kg and a range of 325 km with a CNG tank capacity of 75 liters. It also comes with a five-litre petrol tank to take care of range anxiety issues.

Before this on 2 June 2023, Swaraj Tractors, part of the Mahindra group launched the Swaraj Target in the compact light weight tractor range. The price for the tractor starts from Rs 5.4 lakh. The model was first made available in Maharashtra and Karnataka and it will be available pan-India at a later date.

In just one month the company launched 3 vehicles in 3 segments. This indicates its aggressive focus on expanding its market reach.

The company also has some product launches in the pipeline. On 15 August it plans to launch Oja globally.

Mahindra Oja is the new brand name for its new future-ready range of tractors from its most ambitious global tractor program, K2. The name "Oja" is derived from the Sanskrit word "Ojas" which symbolises vitality, energy, and strength.

Mahindra Oja is M&M's most ambitious tractor program involving 4 platforms, 40 models and 4 key markets - India, the US, South East Asia and Japan.

The Mahindra OJA will have four sub-tractor platforms - the Sub Compact, Compact, Small Utility and Large Utility - tractor categories, covering 40 models across various multiple HP points.

#4 Healthy growth prospect

Going forward the company aims to establish a strong brand presence in the farm equipment sector. Launch of a new product portfolio in both Swaraj and farm will ensure wide reach in the market.

The management believes these products will boost their market presence because these new products are in horsepower segments that are not very strong at present. By FY26 the company aims to multiply its farm machinery business 10 times.

With the launch of Oja and IoT devices, the company aims to bring in new technology in the said field. It is also working on electrification automation.

In the auto segment, the company also aims at strengthening its position in the ICE SUVs. The whole new portfolio of pickups is going to gear up for the company's growth in the next three to five years.

The company intends to boost its EV portfolio along with new product launches in the auto segment. Being India's top EV stock, it has already announced its commitment of over a billion dollars to aggressively participate in the EV race, and it expects a significant 30% of its total sales to come from electric SUVs by 2027.

The company is working to scale up its international operations by two and a half times till FY26.

Investors should keep in mind that all of these are future projections which may or may not turn into reality.

Research analyst at Equitymaster Aditya Vora shared this about M&M, in one of his recent editorials:

1. After a reasonable time for turnaround, if the subsidiaries didn't make money or the profitable ones didn't achieve a threshold ROI, it was time to shut them.
2. The focus was on design and revamping the entire range of passenger vehicles. I'm sure you must be aware how nice M&M cars look today compared to what they were 5-10 years ago.
3. The cash cow, the tractor business, was not used to fund losses of subsidiaries.
4. A rebranding of the organisation.

The confluence of all this factors led to a re-rating of Mahindra as a stock. In fact, the stock price has tripled over the past 4 years.

You can read more here: What's Common Between Mahindra and a Mobile Camera.

How shares of M&M have performed recently

In the past one month, M&M share price has gained 13.4%. In 2023 so far, the stock is up 23.9%.

And in the past one year, it has rallied 38.1%.

M&M shares touched a 52-week high of Rs 1,592.4 today and a 52-week low of Rs 1,113.2 on 7 July 2023.

About M&M

Mahindra & Mahindra (M&M) is the flagship company of the Mahindra Group, which consists of diverse business interests across the globe.

It operates through the following segments: Automotive, Farm Equipment, and Others. The Automotive segment comprises of sale of automobiles, spare parts, and related services.

The Farm Equipment segment involves the sale of tractors and spare parts. The Others segment includes agri, construction equipment, powerful, and spares business units.

It is one of the most reputed brands in India for automobiles, and since its inception in 1945, the company has been going strong, with its cars among the most trusted and most reliable cars in the market.

For more details about the company, you can have a look at Mahindra & Mahindra's factsheet and quarterly results on our website.

You can also compare Mahindra & Mahindra with its peers.

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...