Published on 24/11/2020 11:08:11 AM | Source: Motilal Oswal Financial Services Ltd

Buy Mahindra and Mahindra Ltd For Target Rs.735 - Motilal Oswal

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Mahindra launches its cult off-roader ‘Thar’

Builds in SUV-like features; Aspiration to become a lifestyle vehicle

* Mahindra & Mahindra (M&M) finally revealed the price and launched its second-generation ‘Thar’ on 2nd Oct’20. All the details and features were already disclosed during the unveiling event on 15th Aug’20.

* The new ‘Thar’ would be available in both petrol and diesel engine variants (petrol variant is cheaper by ~INR105k). The price of the petrol variant ranges between ~INR0.98m-1.25m and that of the diesel variant ranges between ~INR1.09m-1.29m.

* M&M took the BS6 transition as an opportunity to make the new ‘Thar’ much more appealing. The new ‘Thar’ is positioned as an aspirational lifestyle vehicle trying to break out from the current focused niche crowd.

* The ‘Thar’ is upgraded for added comfort and almost all SUV-like features – cruise control, electronic stability program (ESP), drizzle resistant touch screen, etc. while maintaining its cult off-roader status.

* Major upgrades other than the new BS6 engine include-

   * Suspension has seen a major and much needed overhaul – especially the rear suspension – to provide better comfort for long drives. This is an important feature to make the ‘Thar’ a lifestyle vehicle.

   * It has both automatic/manual drivetrain options v/s only manual earlier.

   * It has more seating configurations (4/6-seater v/s only 6-seater) to appeal to a wider audience with major upgrade in seating comfort.

   * It also has both hard top and soft top v/s only the soft top earlier.

* We believe the new ‘Thar’ has the capability to lure fan base customers that were earlier shying away because of its technical inferiority. While expanding its base to new customers, it could also take some customers from other UV players due to its off-road + SUV capability, which other players hardly offer.

* MSIL is planning to launch its iconic international off-roader model ‘Jimny’ in India. As seen earlier, MSIL strategically targets only high volume segments. With multiple models, we might see a new sub segment in the UV1 category.

*  Valuation and view: M&M is the best proxy on rural recovery in the auto segment with strong footing in the tractor and LCV business. On the UV side, the ‘Thar’ might give some relief to M&M from the increasing competitive intensity in the fast-growing SUV segment. The company has several other upgrades and new launches lined-up, such as (a) e-KUV100, (b) new XUV500, (c) new Scorpio, and (d) e-XUV300. We have not built in the benefits from any of the imminent launches or material benefit on product development from M&M's recent JV with Ford India. Maintain Buy with an SOTP-based TP of INR735 (Sep’22E SOTP-based).


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