M&M's Growth Potential: Capacity Additions and Strong Order Book Driving Performance

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Mahindra & Mahindra (M&M) Poised for Faster Growth in 2025

Team FS

06/Jun/2024

Key Points:

1: Capacity additions and a strong order book are driving faster growth for Mahindra & Mahindra (M&M) compared to the overall passenger vehicle industry.

2: M&M's automotive segment has emerged as a key contributor to the company's EBITDA, signaling a shift from its traditional reliance on the tractor segment.

3: Despite a slight market share loss in the last quarter, M&M is poised for recovery in FY25, supported by its strong pan-India presence and competitive edge in the tractor market.

Mahindra & Mahindra (M&M) is set to experience accelerated growth in 2025, driven by strategic initiatives and market dynamics. According to Abhishek Gaoshinde, Deputy VP of Research at Sharekhan by BNP Paribas, M&M's capacity additions and robust order book position the company for success in the passenger vehicle industry.

Outperformance in the Market:

M&M has demonstrated impressive performance in the past year, emerging as an outperformer in both the Nifty and Nifty Auto Index. The company's stock price has nearly doubled over the past year, prompting investor interest in its growth prospects.

Shift in Business Dynamics:

Traditionally known for its strength in the tractor segment, M&M has experienced a notable shift in its automotive business. With the automotive segment now playing a more significant role in the company's EBITDA, M&M has diversified its revenue streams and enhanced its growth potential.

Driving Factors for Growth:

The key driving factors behind M&M's growth trajectory include capacity additions and a robust order book. With an order book of approximately 270,000 units, M&M is positioned to outperform the passenger vehicle segment, which is expected to grow by 5-6% in FY25.

Competitive Edge and Market Recovery:

Despite facing a slight market share loss in the last quarter, M&M remains confident in its ability to recover and maintain sustainable EBITDA margins. The company's strong pan-India presence in the tractor market, coupled with its in-house financing arm, provides it with a competitive edge.

Future Outlook:

Looking ahead, M&M's consolidated Earnings Per Share (EPS) is projected to grow at a Compounded Annual Growth Rate (CAGR) of 18%, with a Return on Equity (RoE) target of 20%, according to estimates by BofA. These indicators reflect the company's strong growth potential and its position as a key player in the automotive industry.

In conclusion, M&M's strategic initiatives, coupled with favorable market conditions, position the company for accelerated growth in 2025 and beyond. With a focus on capacity expansion, order book optimization, and market recovery, M&M remains poised to capitalize on emerging opportunities and deliver value to its stakeholders.

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Mahindra & Mahindra (M&M) Poised for Faster Growth in 2025

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