M&M Hits A Record As Analysts See New Scorpio Aiding Market Share, Rerating
Here’s what analysts have to say about M&M’s Scorpio-N launch.
Shares of Mahindra & Mahindra Ltd. jumped to a record high as analysts reiterated their ‘buy’ calls on the automaker after the launch of a new sport utility vehicle.
The company launched Scorpio-N starting at Rs 11.99 lakh, according to an exchange filing on Monday evening after market hours. The vehicle is available in five variants and in seven colours.
Analysts, including at Credit Suisse, Nomura and CLSA, expect the new Scorpio-N to boost M&M’s SUV line-up and lead to an increase in volume market share, as well as trigger a rerating for the stock. The car’s new design, safety and connectivity features, and competitive pricing augur well for the company, they said in their research reports.
The analysts also expect the new Scorpio-N to be a “strong success” similar to the XUV700 and the Thar, and see room for improvement in M&M’s volume if the chip supply issues ease further.
The automaker is simultaneously unveiling the Scorpio-N in South Africa and Nepal, along with India, according to the filing. The new SUV, it said, has the lowest carbon dioxide emission in the segment.
Shares of M&M jumped more than 3.5%, the most in this week, to a fresh record of Rs 1,121.45 apiece. The stock gained for the fourth straight session, up 13% during the period. M&M was among the top gainers on the Nifty Auto index. The trading volume was more than twice the 30-day average when the markets closed on Tuesday.
Of the 46 analysts tracking the company, 43 maintain a ‘buy’, one suggests a ‘hold’ and two recommend a ‘sell’, according to Bloomberg data. The overall 12-month consensus price target implies an upside of 4.5%.
Here’s what analysts have to say about M&M’s Scorpio-N launch.
Nomura
Reiterates ‘buy’ with target price at Rs 1,308, an implied return of 20.81%.
The new Scorpio-N, with five variants in seven colours, has the tallest, widest dimensions in its category and the largest rear seat space, with body 13% lighter than the older Scorpio.
Features such as frequency dependent damping, advanced shock absorbers, terrain management technology make the offering attractive.
The car has been designed with customer focus over competition.
The new Scorpio-N should aid in transforming M&M’s image into that of a lifestyle SUV maker.
Expects new Scorpio-N to be strong success similar to XUV700 and Thar.
Expects the initial 25,000 vehicles to be sold out within a few days.
The company has a potential to sell 4,000-6,000 vehicles per month.
Sees potential from the launch to add to overall volumes.
Expects M&M to be a key beneficiary of the strong model cycle in utility vehicles.
Expects the company to post 27% EPS CAGR on a likely strong auto launch cycle.
Maintains M&M as the top pick among original equipment makers.
Credit Suisse
Reiterates ‘outperform’ with the target price at Rs 1,050 apiece, an implied downside of 3%.
Scorpio-N is an entirely new product with no carry over from the old Scorpio-N classic.
The company expects to add new capacity without any trouble if chip supply improves and demand recovers.
Scorpio XUV700’s long waiting period could lead to cannibalisation due to the launch of Scorpio-N, but company is willing to let Scorpio-N take some focus away from XUV700.
Scorpio-N’s launch will add to M&M’s range of product offerings in SUV segment.
Scorpio-N’s launch could help the company gain market share in SUV segment.
Overall potential market share gains in SUVs post both upside risk to its estimates as well as a re-rating opportunity for the stock.
The stock remains the cheapest auto OEM on core PE at 14xFY24 P/E.
Morgan Stanley
Reiterates ‘overweight/attractive’ with the target price kept unchanged at Rs 1,198, an implied return of 10.65%.
New model has the same engine as that of Thar and XUV700 and appears more premium and upmarket compared to current Scorpio model.
Management’s confidence over the high structural rigidity of Scorpio-N, off-roading capability and higher safety while emitting lowest carbon di oxide augur well for the company.
Multiple new launches in SUV segment by several auto firms underscore the focus of OEMs in SUV space.
Passenger vehicles will continue to lead the recovery in autos.
CLSA
Reiterates ‘buy’, raises target price from Rs 1,312 to Rs 1,356, an implied upside of 25%.
The much-awaited Scorpio-N launch will live up to the expectations, given the advanced features and attractive price points.
Expects new Scorpio-N to boost M&M’s SUV line-up and lead to increase in volume market share.
The price range of Rs 12 lakh to Rs 19.5 lakh is very competitive compared to C and D segment SUVs currently on the market.
Scorpio-N offers a great value proposition to customers compared to other higher-priced SUVs in the market.
Sees room for further improvement in volume if the chip supply issues ease further.
Lifts volume assumptions for M&M’s SUV segment factoring-in incremental volume from the new launch.
UBS
Maintains ‘buy’ with a price target of Rs 1,250 apiece.
Scorpio-N is a completely new ground-up product with no carryover components from existing Scorpio.
The pricing looks attractive for the newly launched vehicle with the top variant commanding a premium of only 4% compared to the old Scorpio, despite technological upgrades.
Expects Scorpio-N to be the third major successful launch for the company after Thar and XUV700 with the vehicle available at a 7-8% discount to competition models like Tata Safari/MG Hector Plus.
Estimates Scorpio and Scorpio-N to clock sales of 9,000 units per month.
Scorpio-N is one of the best value propositions available in SUVs.
Sees upside risk to FY24E volume assumption of 29,400 units per month with higher margins.
IDBI Capital Research
Reiterates ‘buy’, raises target from Rs 1,565 to Rs 1,643, an implied upside of 47.67%.
Scorpio-N is a completely new offering with no carryover components from the existing Scorpio.
Advanced features, focus on safety, lowest carbon dioxide emission in the segment augur well for the newly launched vehicle.
Scorpio-N has potential to create ‘wow’ factor for itself.
Expects Scorpio-N to become the next XUV700 phenomenon for M&M.
Expects the new launch to be a key volume driver for the company.
Increases volume and PAT estimates by 4% and 8.3% for FY24 to account for strong response to existing products and potentially similar response to Scorpio-N.
Emkay Global
Reiterates ‘buy’, raises target from Rs 1,150 to Rs 1,250, an implied upside of 12.36%.
The model is superior to existing Scorpio Classic in terms of power and ride-handling.
The car’s new design, safety and connectivity features, competitive pricing augur well for the company.
Raises volume estimates by 3% each for FY23 and FY25 to account for possible improvement in chip supplies and the company’s large order book.