Auto stock trades near record high. Brokerage has a ‘Buy’ tag

Mahindra and Mahindra (M&M) unveiled the first electric SUV – XUV400, based on its XUV300 subcompact SUV. With this launch, M&M has notched up the competition in the affordable e-SUV segment in India, which is currently ruled by Tata Nexon EV (Tata recorded 87% EV market share in FY22), highlighted brokerage and research firm Prabhudas Lilladher.

The brokerage house has reiterated its Buy rating on M&M shares with a June-2024 target price for 1,400 a piece. The auto stock is hovering around its all-time high level of about 1,300 per share on the BSE.

M&M is one of Prabhudas Lilladher’s preferred stock picks in the auto space given back-to-back successful launches in the highly competitive SUV space, its leadership position in the tractor industry, its proactiveness to leverage the EV trend can lead to value unlocking and its well – played out capital allocation strategy.

“Currently, we are not assigning any value to EVCo, as it does not have any material presence in the e-PV segment. However, success of XUV400 along with market share gains can re-rate the stock,” the note stated.

M&M believes, there remains a vast electric opportunity in the C-segment (4-4.5m), contrasting to Tata Nexon EV’s presence in the B-segment (3.85-4m, Nexon EV has 3.5% share in this segment). We expect XUV400 to come with a price tag of 18-20 lakhs, similar to its competition Nexon EV Max. Price announcement, Bookings are expected in January 2023, deliveries will commence from the end of January 2023.

XUV 400 will go against Tata’s Nexon EV, Hyundai Kona and MG ZS. XUV 400 has notched up the competition in e-SUV space, which is currently dominated by Tata Nexon EV – present in the B-segment.

Under Mahindra’s partnership with Volkswagen (VW’s MEB electric components for M&M’s INGLO platform), the company will launch five models with two brands – XUV and BE. It plans to build models specific to the Indian market with its SUV modular platform. Also, the newly launched XUV400 will move into the new company – EVCo.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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