What Is Driving Rally In Mahindra & Mahindra's Stock Price In Volatile Times

Shares of the country's largest tractor and sports utility vehicle - Mahindra & Mahindra have so far this year surged a whopping 26 per cent to hit fresh 52-week high of Rs 1,057.75 compared with 6 per cent decline in the Nifty 50 index. The stock has been ranked outperformer and is among the top five gainers in the Nifty 50 index so far this year despite heightened volatility in the markets.

What Is Accelerating Surge In M&M Stock Price

Strong demand for its cars, expectation of normal monsoon rains and strong performance in the March quarter of last fiscal year are some of the reasons for sharp surge in Mahindra & Mahindra share price, analysts said.

Mahindra & Mahindra sold 26,632 SUVs in the month of May compared with 7,748 units sold in the same month last year. 

“With sales of 26,632 SUVs in May, we continued the growth momentum with all our brands performing well including XUV700 and Thar. We are witnessing strong bookings and have a robust pipeline. We announced the launch of Scorpio-N, which is generating very high interest levels and promises to be yet another blockbuster from Mahindra. We are closely monitoring the supply chain related issues, which continue to constraint volumes and are taking appropriate actions to mitigate the impact,” said Veejay Nakra, President, Automotive Division, M&M.

Mahindra & Mahindra's newly launched sports utility vehicle XUV700 is among the top selling SUVs in the country with a waiting period of around 12-18 months. It’s another SUV Thar is also in very high demand with waiting period of around 10 months, analysts added.

Moreover, expectation of a normal monsoon rains will boost rural incomes and that also augurs well for its farm equipment business.

“XUV700 is seeing strong booking (over 9,500 units per month) despite a high waiting period. It has open bookings of 78,000 units (overall order book of 1,70,000). Cancellation rates stood at 10-15 per cent. It doesn't expect the waiting period to fall materially as bookings are twice its production rate,” brokerage firm Motilal Oswal said in a note

While the outlook for Tractors has improved, we expect the Auto business to be the key growth driver over the next couple of years, led by strong momentum in both SUVs (driven by new products and the easing of supply issues) and LCVs (cyclical recovery), Motilal Oswal added.

Strong Earnings

Mahindra & Mahindra last month reported that its profit jumped nearly five-fold to Rs 1,192 crore for quarter ended March 31, 2022. The company had posted a profit of Rs 245 crore for the year-ago period, it said in a statement.

Revenue grew 28 per cent to Rs 17,124 crore in the period under review as compared with Rs 13,356 crore in March quarter 2020-21, it said.

M&M said it achieved the highest ever standalone revenue for auto and farm segments at Rs 55,300 crore for FY22, which is 29 per cent higher than previous year's.

It also said the company's auto business delivered highest ever quarterly UV (utility vehicle) volumes in Q4 with 42 per cent year-on-year growth while Farm Equipment Sector (FES) tractors market share for FY22 stood at 40 per cent, a growth of 1.8 per cent Y-o-Y.