Reiterate ‘buy’ for M&M, target price at Rs 1,075

By: | Published: September 12, 2018 6:04 AM

We attended the launch event of M&M’s new MPV — the Marazzo — in Nashik. In most aspects, the product is a huge step-up from Mahindra’s offerings.

M&M, target price, Marazzo, Mahindra, Toyota Innova Crysta, Maruti Ertiga, market, moneyThe engine specs support BS-VI compliance and the vehicle will only require addition of exhaust after-treatment systems to meet BS-VI emission norms.

We attended the launch event of M&M’s new MPV — the Marazzo — in Nashik. In most aspects, the product is a huge step-up from Mahindra’s offerings. At Rs 1-1.4 mn, Marazzo is priced between the Toyota Innova Crysta (average volumes of 7k/month) and Maruti Ertiga (average volumes of 5k/ month). Given the pricing, product features and M&M’s distribution network, Marazzo’s volumes can easily settle at 3k per month.

Marazzo and the upcoming compact SUV (S201) fill the gaps in the portfolio and will help arrest decline in M&M’s UV market share. We continue to believe FY21 will be a challenging year for M&M (inherent diesel portfolio most impacted by BS-VI emission norms), but for now, the stock continues to have rerating triggers.

We maintain estimates and reiterate BUY with a SoTP based TP of Rs 1,075. The Marazzo has been developed over a period of four years. M&M has incurred $200 mn for developing it. The product was designed in collaboration with Mahindra Automotive North America, Detroit, with inputs from Pininfarina. The Marazzo is based on a body-on-frame architecture with a transverse engine mounted horizontally across the width of the engine compartment, which allows having a bigger cabin for passengers.

This has also led to a lower floor height (easy ingress-egress), a flat floor and improved ride comfort and handling (according to the management). Management highlighted that no other vehicle globally has such architecture. Marazzo’s 1.5L, 4-cylinder engine is a completely new engine developed ground-up by M&M and uses aluminium parts to reduce overall weight.

The engine specs support BS-VI compliance and the vehicle will only require addition of exhaust after-treatment systems to meet BS-VI emission norms. M&M has only released a diesel variant and will introduce petrol and automatic variants post BS-VI. Currently, 90-95% of the volumes sold in the MPV segment are diesel variants. M&M is planning to launch two more products viz. S201 – compact SUV based on the Ssangyong Tivoli, and Y400 – SUV based on the G4 Rexton.

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