HSBC has a buy rating on Mahindra and Mahindra with a target price of ₹3,390, implying a potential upside of more than 12% from the closing price on November 22.
However, despite its overall optimism on the segment, it has retained its ‘reduce’ call on the shares of Escorts with a target price of ₹3,180, which means the brokerage sees a potential downside of over 9% in the stock price.
The brokerage believes that regional reservoir level trends are more aligned with M&M’s strong state holds, which is positive for the company. It added that strong reservoir level, La Niña settling in and a low base indicate a strong tractor volume growth over FY25-27.
The brokerage note comes days after Federation Of Automobile Dealers Associations (FADA) released the 42-day festive period data as per which the tractors segment saw a 1.64% year-on-year decline in sales as dealers sold 85,216 units compared to 86,640 during last year’s festive period. However, in October tractor sales rose 3% on a YoY basis.
According to farm and construction equipment firm Escorts Kubota Ltd whole-time director and CFO Bharat Madan, tractor sales in the festive months, spanning from September to November, are expected to grow 8-10% this year on the back of good monsoon lifting market sentiments,
After a soft first half, the tractor industry is expected to gain momentum in the second half of the ongoing fiscal, growing in double digits, leading to an overall mid-single digit growth for the full year, he told PTI on November 24. The festive season months account for about 40-45% of the industry sales, he said, adding that this year, “in terms of volume, the industry will be somewhere around 3,25,000 tractors” for the season.
In October, Hemant Sikka, President of the Farm Equipment Sector, had also maintained M&M’s 5% growth target in tractor sales for the current financial year.
In an interview with CNBC-TV18 earlier this month, citing Mahindra’s 80% market share in the tractor sector despite foreign competition, Mahindra Group CEO and MD Anish Shah asserted, “Indian automakers today can compete globally,” adding, “Just wait for our electric vehicles.”
M&M shares traded 3% higher at ₹3,103.45 whereas Escorts Kubota stock was up 2.47% at ₹3,599.45 on BSE at 9:45 am.
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