The spotlight is back on Mahindra & Mahindra (M&M) after the big price target upgrade by global brokerage Nomura . The brokerage has set a target price of Rs 4,662. This translates to nearly 49% upside from current levels. But what is really driving this optimism?
Let’s take a look at the key reasons why the brokerage is bullish on this auto sector stock
Nomura on M&M: A consistent performer across segments
According to the brokerage report, the company continues to remain a strong contender within the original equipment manufacturer (OEM) space. The brokerage house noted, “We maintain Mahindra & Mahindra as our top pick in OEMs. We expect strong execution across segments, with continued market share gains.”
Nomura on M&M: Demand momentum stays intact
As per the brokerage report, demand trends have remained firm across categories. Passenger vehicles (PVs), especially sport utility vehicles (SUVs), are seeing steady traction driven by new launches and consumer preference for premium models.
The report noted, “Management sees continued strength across segments, with PVs growing 19% FY26 YTD driven by new launches and sustained SUV demand.”
Light commercial vehicles (LCVs) are also seeing growth. This is supported by replacement demand, while tractors continue to benefit from rural demand trends.
Nomura on M&M: SUVs and premiumisation drive growth
A key part of the growth story lies in the company’s SUV portfolio and its shift towards premium offerings.
According to the brokerage report, higher demand for feature rich vehicles is helping improve both volumes and realisations.
The brokerage expects SUV sales to keep growing over the next few years.
Nomura on M&M: Managing costs amid pressure
Rising commodity prices remain a concern for the auto sector. However, the brokerage believes the company has strategies in place to handle this challenge.
It added, “Management expects to manage commodity pressure in the near term through hedging, pricing and favorable mix.”
This means the company is adjusting prices, managing input costs, and focusing on a better product mix to protect profitability. The brokerage estimates earnings before interest, taxes, depreciation and amortisation (EBITDA) margins at 14.3%, 14.9%, and 15.1% for FY26 to 28, although it notes that rising input costs remain a key risk.
Nomura on M&M: Electric vehicles add to the story
The electric vehicle (EV) business is gradually becoming an important piece of the puzzle. As per the brokerage report, the segment is already stable at an operating level. It said, “EVs: the company indicated that its EV business continues to be EBITDA-positive.”
With expected policy support and increasing volumes, the EV segment could contribute more meaningfully over time. The brokerage also expects margins to improve as scale increases.
Nomura on M&M: Valuation and triggers ahead
From a valuation standpoint, the brokerage finds the stock reasonably priced considering its growth outlook.
It noted, “Current valuation at approx. 14.4x FY28 core P/E is attractive, in our view.”
The target price is based on 16 times the estimated enterprise value to EBITDA (EV/EBITDA) for FY28.
Key triggers going forward include sustained SUV demand, growth in electric vehicles, and potential developments like the initial public offering (IPO) of its last-mile mobility business.
Conclusion
Overall, Nomura pointed out that M&M’s consistent growth trajectory is one of the main reasons supporting the big upgrade. It ideally fits into the ‘not so hot, not so cold’ category, showing steady growth across segments. The shift to SUVs and the current portfolio are seen as key factors supporting growth outlook.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.