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Business News/ Markets / Stock Markets/  Multibagger Stock: Mahindra & Mahindra soared over 160% in 2 years, advanced 490% in 4 years

Multibagger Stock: Mahindra & Mahindra soared over 160% in 2 years, advanced 490% in 4 years

Mahindra & Mahindra, a diversified automobile company in India, experienced remarkable growth in SUV sales and revenue market share in FY24.

Mahindra & Mahindra: In the last two years, it has gained 167%.Premium
Mahindra & Mahindra: In the last two years, it has gained 167%.

In recent years, there has been a significant surge in vehicle demand in India, fueled by increased economic activity leading to higher disposable incomes, growth in the working population, an expanding middle class, low vehicle penetration ratios, expanding highways, and evolving consumer preferences favoring vehicle ownership. 

Additionally, regulatory initiatives such as the phasing out of old vehicles and the non-renewal of registration for 15-year-old government vehicles have stimulated demand for new vehicles. These measures have encouraged consumers to upgrade to newer models, contributing to the overall growth in vehicle sales.

In the fiscal year 2023–24, passenger vehicle sales in India reached record levels, exceeding 4.2 million units, particularly driven by robust growth in the sports utility vehicle (SUV) segment.

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As a result, companies in the passenger vehicle (PV) segment have demonstrated strong performance, reporting impressive volume growth. This has subsequently driven increased demand for these companies' stocks, leading to a significant rise in their market value.

Notably, Mahindra & Mahindra (M&M), the automotive and farm equipment flagship of the Mahindra Group, was one of the stellar performers in recent years. The company's shares, which began their upward journey in April, have continued to maintain the momentum to date, rewarding shareholders handsomely.

Over the past year, the shares have surged nearly 99%. In the last two years, they have gained 167%, and over the past four years, they have gained 490%, appreciating from 436 apiece to the current price of 2,569 apiece.

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Mahindra & Mahindra is one of the most diversified automobile companies in India, with a presence across 2-wheelers, 3-wheelers, passenger vehicles (PVs), commercial vehicles (CVs), tractors, and earthmovers. 

It also has a significant presence in financial services, auto components, hospitality, infrastructure, retail, logistics, steel trading and processing, IT businesses, agriculture, aerospace, consulting services, defence, energy, and industrial equipment through its subsidiaries and group companies.

Boosts its SUV market presence

In FY24, the company experienced significant growth in its SUV revenue market share, climbing by 130 basis points year-on-year to reach 20.4%. This remarkable achievement was fueled by the company's best-ever sales performance, with a total of 459,877 units (SUVs) sold during FY24. 

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This translated to a robust 28% year-on-year growth compared to the previous fiscal year, where 359,253 units were sold, indicating an impressive increase of 100,624 units in FY2024.

As of May 1st, 2024, the company has open bookings at 220,000 units. This figure includes bookings for various models, with the XUV700 accounting for 16,000 units, Scorpio at 86,000 units, and Thar at 59,000 units, as highlighted by the company in its Q4FY24 investor presentation. 

Notably, the newly unveiled XUV 3XO received an unprecedented response, amassing 50,000 bookings within just one hour of its launch. The company has a cancellation rate of 10% per month. Additionally, the company is set to introduce the Thar (five-door variant) in the first half of FY25, further expanding its product lineup.

Also Read: Mahindra & Mahindra in the fast lane on higher capex, upcoming launches

Meanwhile, the company maintains market leadership in 3W EVs, commanding a significant 59% market share in FY24. In the EV penetration segment for the L5 category, the figure now stands at 11.3% as of FY24. The management anticipates rapid electrification in this segment in the forthcoming quarters.

SUVs: Accelerating ahead

Sports utility vehicles (SUVs) have emerged as a dominant force in the passenger vehicle (PV) segment. Recognised for their versatile road capabilities and dynamic presence, SUVs have surpassed traditional preferences, capturing the attention of a growing demographic.

Beyond their visual appeal, SUVs offer a compelling blend of performance, spaciousness, and adaptability, making them a preferred choice among consumers seeking a versatile driving experience.

As India's road infrastructure evolves to encompass diverse terrains, the inherent versatility of SUVs meets the changing needs of drivers navigating city streets, highways, and beyond. The combination of an elevated driving position and a sturdy design that commands attention has propelled SUVs into the spotlight, marking a significant shift in automotive preferences.

Also Read: Maruti Suzuki SUVs have surpassed competitors, but dominance is another matter

In a nation where the youth demographic holds sway over trends, the ascent of SUVs resonates with the aspirations of India's dynamic and youthful population. The fusion of style, performance, and versatility strikes a chord with the adventurous spirit of youth, transforming SUV ownership into more than just transportation but a lifestyle choice that transcends the ordinary.

This exploration delves into the driving factors behind the surging demand for SUVs, especially the compact SUVs, highlighting the unique road presence they bring to the automotive landscape.

Future growth trajectory

Looking ahead, Mahindra & Mahindra aims to sustain its growth momentum through a robust launch pipeline. The company plans to introduce nine ICE SUVs, including six new launches and three mid-cycle upgrades, along with seven battery electric vehicles (BEVs) and seven light commercial vehicles (LCVs) by 2030, according to Q4 earnings report. 

Also Read: Mahindra's got a tech secret behind its aggressive SUV pricing

To support its ambitious growth plans, Mahindra & Mahindra is strategically ramping up its production capacity. By the end of FY25 and FY26, the company aims to increase its monthly production capacity to 64,000 and 72,000 units, respectively, compared to 49,000 units per month at the end of FY24. 

This capacity expansion includes an additional 15,000 units allocated for Thar 5D, XUV 3XO, and XUV 400, along with 10,000 units dedicated to electric vehicle (EV) production. With an additional 8,000 units of EV capacity planned.

Bolstered by a strong order backlog and upcoming launches, domestic brokerage firm, Motilal Oswal anticipates M&M to continue outperforming industry growth in FY25, projecting a 14% volume CAGR in UVs over FY24–26E.

Also Read: Rural India drives passenger vehicle sales record in FY24


Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 28 May 2024, 12:16 PM IST
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