M&M Q4 Review: Analysts Bullish On Growth Plans, Cost Cuts Despite Supply-Chain Woes; Stock Slumps
The Mahindra Thar 2020. (Photo: M&M)

M&M Q4 Review: Analysts Bullish On Growth Plans, Cost Cuts Despite Supply-Chain Woes; Stock Slumps

Shares of Mahindra & Mahindra Ltd. fell even as analysts maintained their bullish investment recommendation for the automaker, citing new launches, cost cuts and focus on turning around its subsidiaries, among others. But execution of plans, competition and supply chain issues are key concerns.

M&M saw its profit slump sequentially in the January-March period, dragged down by an exceptional item and prolonged supply-chain issues. Its revenue fell and operating margin contracted. The company, however, said reshaping of its international subsidiaries is almost over, and it now aims to spend nearly Rs 12,000 crore to fuel launches and upgrades in passenger car and commercial vehicles segment.

While the company expects volumes to fall 15-20% over the preceding quarter in the three months ending June, it is confident that demand will rebound by June-July.

Shares of M&M dropped as much as 6.6%, the most since April 12, in early trade on Monday. Of the 41 analysts tracking the automaker, 37 have a ‘buy’ rating, and four recommend a ‘sell,’ according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 16.1%.

Also read: M&M Q4 Results: Profit Slumps On Exceptional Item, Supply Chain Issues

Here’s what brokerages have to say about M&M’s fourth-quarter results...


  • Maintains ‘buy’ with a target price of Rs 1,085 apiece.

  • Growth capex in place, execution will be key catalyst.

  • International loss may fall to Rs 300 crore by FY22F and turn profitable by FY23F.

  • Capex plan gives visibility that underlying auto model cycle will remain strong.

  • “Consolidated auto business RoEs have improved sharply to about 16% if we annualise 4QFY21 financials.”

  • Continues to have a strong share in the light commercial vehicles segment, with a 37% share in wholesales in FY21.

  • New utility vehicle launches in large UV segment to drive growth

Dolat Capital

  • Maintains ‘accumulate’ with a target price of Rs 950 apiece.

  • Revenue and Ebitda numbers were broadly in line with estimates in 4QFY21.

  • Strong order backlog and cost reduction are key positives.

  • Margin pressure visible due to a sharp spike in raw material prices.

  • Maintains positive stance on M&M on the back of a strong order book in automobile, cost reduction exercise along with curtailing losses in subsidiaries and strong free cash flow generation.

Motilal Oswal

  • Maintains ‘buy’ with a target price of Rs 980 apiece.

  • Auto business to drive growth as tractors growth moderate.

  • Supply chain disruption is expected to ease from July-August 2021.

  • M&M’s SUV business is severely challenged, and do not see any respite for the company in this category in the foreseeable future.

  • Recovery in tractors to continue; reforms to potentially drive the next phase of farm mechanisation.

  • Looking beyond the cyclical downturn, fundamentals of the LCV segment are strong.

Prabhudas Lilladher

  • Maintains ‘buy’ with a target price of Rs 950 apiece.

  • Sharp turnaround in global auto and farm equipment subsidiaries.

  • Supply challenges should continue to impact auto segment volumes till first half of FY22 at least.

  • Strong product launches in UVs and tractors to help industry outperform.

Nirmal Bang Institutional Equities

  • Maintains ‘buy’ with a target price of Rs 972 apiece.

  • Strong launch product pipeline (new Scorpio and XUV500) for this year, low channel inventory and robust demand (high waiting period) should support volumes.

  • Global semi-conductor shortage, persistent supply chain constraints and higher commodity costs are likely to weigh negatively on profitability in the near term.

Also read: M&M Lines Up Rs 12,000 Crore To Revamp Vehicles, Regain Market Share

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