Decline in M&M shares a buying opportunity: Brokerages

ET BureauLast Updated: Feb 25, 2025, 05:47:00 AM IST

Synopsis

Brokerages Bernstein and Jefferies view the recent drop in Mahindra & Mahindra shares due to concerns over Tesla’s potential market entry as a buying opportunity. Analysts emphasize M&M's strong product linkages with autos and agriculture, considering the stock a solid long-term investment.

Mumbai: Brokerages Bernstein and Jefferies said the recent decline in Mahindra & Mahindra (M&M) shares, driven by concerns over Tesla's likely entry into the country, is a buying opportunity for investors. Goldman Sachs said the stock in the past has returned 23% over 12-month periods following instances of a 15% drop.

M&M shares, which rose 1.5% to close at ₹2,710.5 on Monday, have shed 15.3% since February 7.

"This dip is an opportunity, and M&M's broad product linkages with autos and agri make it a fundamentally sound investment," said Bernstein in a client note. "The stock remains our top pick for its capital allocation model and longer investment horizon."

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The brokerage has a price target of Rs 3,650 on the stock, implying an upside of nearly 35% from Monday’s closing level. Goldman’s and Jefferies’ price targets of Rs 3,800 and Rs 4075 suggest gains of 40% and 50% respectively.

Jefferies said the impact of Tesla’s entry on M&M would be limited in the near term citing the gap in vehicle prices and the Electric Vehicle (EV) policy which offers lower duty only on limited volumes for high-priced vehicles. According to the brokerage, the automaker is a better investment case than Maruti Suzuki and Hyundai Motor because of stronger industry demand tailwinds, improving market share across tractors and Sports Utility Vehicles (SUVs) and lower valuations.

Among the top blue-chip performers in recent times, M&M shares have gained nearly 240% in the past three years against the 35% advance in the Nifty and the 98% surge in the Nifty Auto Index. Goldman said in the past 10 years, M&M returned an average of 36% over 24-month periods on the heels of a 15% stock price decline from the peak. Bernstein said Tesla’s potential entry into India impacts sentiment but does not alter M&M’s core demand.

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