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Despite the recent price cut on the XUV 700 by Mahindra & Mahindra (M&M), brokerages remain optimistic about the company’s future performance. Both Morgan Stanley and Investec have expressed positivity towards M&M, viewing the price reduction as a strategic move that is unlikely to have a significant negative impact on the company’s long-term prospects.
Investec has affirmed its ‘Buy’ rating on M&M, setting a target price of Rs 3,100, while Morgan Stanley has kept its ‘Overweight’ call with a target price of Rs 3,049. Following the announcement of the price slash on the XUV 700, M&M’s shares experienced a decline of over six percent on July 10. The consecutive day saw a further 0.8 percent drop to Rs 2,711.
The decision to reduce prices on the AX7 range by Rs 2 lakh has brought the starting price down to Rs 19.49 lakh from Rs 21.4 lakh. Investec views this price cut as a strategic move to expand the Total Addressable Market (TAM) and prepare for a mid-cycle refresh of the product, as well as clear existing inventory for the refreshed model. Additionally, M&M has scaled up its manufacturing capacity for the XUV 700 in accordance with anticipated demand.
Morgan Stanley noted that the announced price cuts are not expected to have a significant impact on the company’s Earnings Per Share (EPS). The brokerage highlighted various positive drivers for M&M, including the upcoming launch of the Thar 5-door variant, robust UV volumes, and the potential recovery in tractor sales in the latter half of the fiscal year.
Despite potential risks related to a slowdown in the electric vehicle (EV) segment and hybrid duty cuts, Morgan Stanley remains confident that M&M will maintain its position as the fastest-growing passenger vehicle Original Equipment Manufacturer (OEM) in FY25.
In conclusion, brokerages are upbeat about Mahindra & Mahindra’s future, emphasizing positive catalysts and strategic maneuvers to navigate through challenges and ensure long-term growth in the competitive automotive market.
