CLSA has upgraded Mahindra & Mahindra (M&M) to an outperform rating and raised its target price to Rs 3,400, implying an 11% upside from the current market price (CMP) of Rs 3,062.00. The brokerage cited the company’s profitable growth in the SUV segment and a rising return on equity (ROE) as key drivers of a sustainable re-rating.
M&M’s success with models such as the XUV 3X0, Thar Roxx, and upcoming electric vehicle (EV) launches is expected to further scale its SUV business and increase its average selling price (ASP). CLSA estimates the EBIT margin for the SUV segment to remain around 9% for FY26-27, suggesting the potential for consensus upgrades.
In addition to its robust SUV performance, CLSA expects a revival in the domestic tractor industry starting FY26, driven by favorable reservoir levels. With a return on equity (ROE) exceeding 20% since FY24, M&M’s valuation remains attractive with a 3% FY26 free cash flow (FCF) yield, even with significant capital expenditure of over Rs 70 billion per annum. CLSA has also raised its earnings per share (EPS) estimates for FY25-26 by 5% each.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consider consulting a financial advisor before making any investment decisions.
