Mahindra & Mahindra reported Q1FY27 operating revenue and profit a touch higher than market estimates. However, margins fell short of expectations because of higher raw‑material prices, supply‑chain hiccups and manpower constraints.
The management is implementing aggressive cost‑reduction measures. It has kept its FY27 volume growth targets for SUVs in the mid‑to‑high teen range, tractors in the mid‑single digits, and light commercial vehicles in the high‑single digits.
An increase in electric vehicle volumes and better pricing is expected to bring operating leverage, improving profitability. The company’s “Growth Gems” are also projected to support both top‑line and bottom‑line growth.
We forecast a volume CAGR of 8.0% and realization CAGR of 3.6% for FY26‑28E. This translates into revenue, EBITDA and APAT CAGRs of 12.7%, 10.3% and 9.2% respectively.
We reaffirm a BUY rating with a target price of INR 3,950, valuing the core business at 24× P/E on FY28E standalone earnings per share, including the value of its subsidiaries.