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Home / Markets / Mark To Market /  M&M’s Scorpio-N sees robust demand; shares top Nifty gainer
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Mahindra & Mahindra Ltd’s (M&M) shares rose 7% on Monday to touch a new 52-week high of Rs1248.7 apiece on the National Stock Exchange. The company’s auto volumes rose by 4% sequentially to 56,148 units in July. This was ahead of expectations. Analysts at Jefferies India expected July volumes to stand at 53,200 units.

Further, there was optimism following the company’s announcement on Saturday that the all-new Scorpio-N recorded over 1,00,000 bookings under 30 minutes which translates into an ex-showroom value of about 18,000 crores. Deliveries are likely to start late September onwards.

“To compare with the recent model launches in the sport utility vehicle (SUV) sector, Scorpio-N’s booking has surpassed the initial booking number of M&M’s XUV700 and Maruti Suzuki India’s Brezza," point out analysts at Prabhudas Lilladher in a report on 31 July.

Such strong demand would boost M&M’s volumes and accordingly, analysts at Prabhudas Lilladher have raised M&M’s domestic passenger vehicle volume estimates by about 3%/2% and earnings per share by 1% each for FY23/24.

M&M aims to deliver over 20,000 units of this vehicle by December. This remains to be seen as supply chain constraints are far from over though the situation is getting better.

The turnaround in M&M’s automotive segment on account of new launches and improving margins seem to have pleased investors. After all, the shares have surged by 48% in the calendar year 2022 so far versus 17.8% appreciation in the Nifty Auto index.

Further, with softening costs of commodities such as steel and aluminium, margins can be expected to rise. But this could fully play out December quarter (Q3FY22) onwards as the benefit comes with a lag.

As such, the automaker’s margin performance in Q1FY23 would be key monitorable. Also, the management’s commentary on chip shortage and its electric vehicle plans would require closer tracking. M&M is likely to announce its Q1 results on 5 August.

“Though we are positively surprised with the unrivalled bookings that Scorpio-N has received, we believe there could be duplication of these bookings, cancellations going ahead (currently 10-15% cancellation rate), and cannibalization of M&M’s other offerings like Scorpio Classic and XUV700," added the Prabhudas Lilladher report.

 

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