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Key takeaways from Investor Day 2024

Mahindra & Mahindra (M&M) recently hosted its investor meet highlighting its growth prospect and future business strategy. In the SUV business, the company plans to launch 16 new models by FY30 across ICE and EV powertrains. Investments in the Auto business are expected to be INR 270bn between FY25-27, largely towards developing new products and capacity expansion. In the Farm Equipment business, industry is expected to grow by singledigit during FY25 on the expectation of above-normal monsoon. M&M is focused on driving strong double-digit growth in Farm Machinery segment through product and network expansion. Considering the strong demand tailwind in autos (led by recent launches), expected recovery in farm segment, preparedness for EV transition and consistent execution on improving ROEs/FCFs, we have upgraded our target multiple to 24x (20x earlier) for the core business. We maintain BUY with SoTP based Mar’25 TP of INR 3,125.

* Plans multiple new launches in SUV business to maintain leadership position: In the SUV segment, M&M plans to launch 9 ICE SUVs (incl. 3 refreshes) and 7 BEV models by FY30. It plans to introduce its first Born Electric vehicle during 1QCY25 and is targeting for 30% EV penetration by FY27. Focus will be on creating strong value proposition for customers through differentiated product offerings. M&M’s current SUV mkt. share stands at 20.4% in revenue terms (leadership position) and 18.2% in volume terms. With these launches, M&M is aspires to maintain its leadership position (in revenue terms) in domestic SUV segment. The company indicated that despite ramp-up in production, its order book continues to remain healthy led by positive customer response to recently launched 3XO (owing to its features and competitive pricing). FY24 exit SUV capacity stands at 49k units/month and the company plans to ramp this up to 64k / 72k units / month by FY25 / FY26 (5k units/month towards ICE and 18k units/month towards EVs). In the international business, M&M plans to enter UK and Europe over the next 6-9 months with the focus on exporting BEVs. Management also highlighted that it has brought down the fixed costs by 660bps over the last 4yrs through astute cost controls. Going ahead, it expects Auto EBIT margins to gradually improve through operating leverage, pricing / varianting strategy and cost control initiatives. Capex and investment for the Auto segment is expected to be INR 270bn between FY25-FY27.

* Capitalize leadership position in FES to scale-up Farm Machinery business: Higher farm power (at 4HP/hectare from 2.9HP/hectare currently) to achieve 2030 foodgrain demand and consistent increase in cropping intensity is expected to necessitate tractor population of 17mn units by 2030 (from 8mn units current), implying significant headroom for growth in the domestic tractor market. Further, India's farm mechanisation level is currently at 47% vs. 60-95% for countries like China, Brazil, Russia, and USA, indicating significant growth potential. Market size for rotovators (M&M has 21% mkt. share) and rice transplanters (M&M has 40% mkt. share) is currently 3k units p.a. in India vs. 100k units p.a. in China. To capitalize on this opportunity, M&M is scaling-up its presence in Farm Machinery segment by 1) creating strong product portfolio across categories, 2) leveraging M&M existing tractor channel and 3) creating independent dealer network. Overall, M&M is aiming for 40% CAGR growth in the medium-term and expect significant improvement in profitability over next 18-24 months. In the international,business, M&M plans to enter Western Europe and ASEAN with total market potential of 180k units p.a. Management indicated that launch of ‘OJA’ platform has strengthened its product portfolio and the company plans to leverage its leadership position in India to scale-up in the international markets.

* Other businesses: 1) LCV segment: M&M plans to introduce 7 new LCVs by 2030 with the focus on addressing gaps in product portfolio and maintain leadership position (49% mkt. share currently in <3.5T LCVs. 2) Trucks and Bus segment: M&M has already achieved cash break-even and is now aiming to expand its market share to 7-8% (from 3.3% currently) through product portfolio and network expansion. 3) Last-mile Mobility: Electric 3W/Cargo/SCV penetration currently stands at 11%/14%/2% (for industry) and expected to increase to 50%/55%/20% by FY30. M&M indicated that entry of leading OEMs in E3W space has doubled the pace of electrification. And, the company plans to maintain its competitiveness and leadership position through product actions, competitive pricing strategy, expanding dealer network and enabling finance penetration. Further, the management indicated that its Last-mile Mobility division has turned profitable in FY24. 4) Hybrid technology: M&M indicated that it remains committed to EVs. While Hybrids may do well in the near-to-medium term, industry is expected to ultimately transition to EVs. If needed, M&M will be ready with Hybrids. The company indicated that it would need ~15- 25% EV penetration in FY27 to meet CAFÉ 3 norms.

* Capital allocation: Management reiterated its strategy on tighter capital allocation policy and remains committed to sustaining at least 18% ROE and 15-20% EPS growth. Management indicated that its ‘Growth Gems’ – Susten, E3Ws, Hospitality, Real Estate, Logistics, Classic Legends etc. are on track to create significant value over medium-tolong term.

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