UBS downgrades Mahindra & Mahindra stock on valuation concerns By Investing.com
On Friday, UBS downgraded shares of Mahindra & Mahindra Ltd (MM:IN) (OTC: MAHMF) stock, adjusting the rating from Buy to Neutral, despite increasing the price target to INR3,000.00 from INR1,850.00.
The revision follows a period of significant growth for the Indian automaker, which has seen its share price soar, leading to a valuation that UBS now considers stretched.
The company, known for its sports utility vehicles (SUVs), tractors, and light commercial vehicles (LCVs), has been experiencing industry-leading growth volumes. UBS acknowledges the company’s market share gains, propelled by recent product launches. However, the firm anticipates that these gains will continue at a decelerated pace.
UBS’s new price target represents a 7% increase over the current share price. The firm’s reassessment is partly due to Mahindra & Mahindra’s auto business trading more than four standard deviations above the five-year average. This surge in stock price has prompted UBS to adopt a more cautious stance on the company’s market valuation.
The company’s strategy towards emission compliance is heavily reliant on electric vehicles (EVs). Currently, the EV off-take is approximately 2.5% of the industry and close to 2% of Mahindra & Mahindra’s SUV sales. UBS expresses concern over the company’s ambitious EV-only approach, considering the modest adoption rate.
According to the management of Mahindra & Mahindra, a 20-30% adoption of EVs is necessary by 2027 to meet the proposed corporate average fuel economy (CAFÉ) norms.
UBS’s position reflects a careful analysis of Mahindra & Mahindra’s current market performance and future compliance challenges. The firm’s adjustment of the price target upwards, despite the downgrade, indicates a recognition of the company’s solid growth but tempered by the risks associated with its EV strategy and the recent rapid rise in its stock price.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.