MAHMF - Mahindra & Mahindra is called a top Indian auto stock by HSBC

HSBC calls out +20% upside on Mahindra & Mahindra Limited ( OTC:MAHMF ) after taking in the Indian automaker's FQ3 earnings report.

Analyst Yogesh Aggarwal noted Mahindra & Mahindra SUV demand has stayed solid with order backlog of 266K units reported. The margin outlook is also seen as a positive with recent price hikes factoring in.

The firm keeps a Buy rating on M&M with an investment thesis that the company will sees a growing share of profits from autos and improved capital allocation.

"In FY21/22, the auto business contributed 16%/26% to total EBIT of the company; we expect this to rise significantly to 48%/54% in FY23e/FY24e, thanks to the success of new models and the core business’ focus on capital allocation. In terms of valuation, the core business is now trading at c15.8x on FY24e EPS (ex-dividends), c35% cheaper than peers."

Although India's EV market is small, Mahindra & Mahindra is investing about $1.2B this year to set up an electric vehicle plant in India near Pune.

Mahindra ended 2022 with the fourth highest tally of automobile sales by units in India after Maruti Suzuki India, Hyundai Motor ( OTCPK:HYMLF ) and Tata Motors.

HSBC has a Buy rating on Mahinda & Mahindra and price target of 1600 rupees (21% upside).

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