M&M Shares Jump Over 4% After UBS Upgrade, Strong SUV Sales Drive Optimism

UBS Raises Mahindra & Mahindra to ‘Buy,’ Predicts 9% Volume Growth in FY26

Shares of Mahindra & Mahindra (M&M) surged over 4% on Wednesday after global brokerage UBS upgraded the stock to ‘Buy’, citing strong demand for SUVs, growth in the farm equipment segment, and an attractive valuation.

The upgrade comes after a 19% correction in M&M’s stock price, which UBS believes was an overreaction to concerns about the company’s electric vehicle (EV) segment. The firm remains optimistic about M&M’s long-term growth potential, particularly in the SUV and tractor markets, which have continued to show resilience.

M&M Stock Rallies on Positive Outlook from UBS

• M&M’s share price rose 4.51% to ₹2,732 on the Bombay Stock Exchange (BSE) as investor sentiment improved following the upgrade.
• UBS noted that the 19% drop in M&M’s stock price outpaced the 13% decline in the Nifty Auto index, indicating a potential buying opportunity.
• The brokerage firm highlighted that M&M’s risk-reward ratio is now highly favorable, as the company continues to dominate India’s SUV and tractor segments.

UBS Expects M&M to Outperform Auto Industry Growth in FY26

UBS projects that M&M’s sales volumes will grow 9% in FY26, significantly outpacing the broader auto industry’s estimated growth of just 2%.

• SUVs contribute nearly 50% of M&M’s EBITDA, reinforcing the company’s dominant position in the domestic passenger vehicle market.
• The demand for M&M’s newly launched SUVs remains strong, with several models witnessing long waiting periods.
• M&M’s farm equipment division, which accounts for 40% of its EBIT and 30% of its total valuation, continues to show steady growth, supported by strong rural demand and favorable monsoon conditions.
• The brokerage also noted that there are no immediate regulatory or technological risks affecting M&M’s farm equipment business, making it a stable revenue driver.

M&M’s EV Strategy: Slow Start But Long-Term Potential Remains

While M&M’s recent EV bookings of 30,000 units fell short of expectations, UBS remains confident about the company’s long-term prospects in the segment.

• The report highlighted that India’s EV market remains in the early stages of growth, and consumer adoption is gradual due to high initial costs and limited charging infrastructure.
• UBS expects M&M to introduce more electric SUVs in FY26, which could strengthen its position in India’s evolving EV landscape.
• M&M’s ability to price its EVs competitively will be crucial in determining how well it competes with other automakers in the electric space.

Tesla’s India Entry Not a Major Threat to M&M’s Market Share

The potential entry of Tesla into the Indian market has raised concerns about its impact on domestic automakers, but UBS does not view Tesla as an immediate threat to M&M.

• Tesla’s Model 3, priced at $35,000 (₹31 lakh), has a low ground clearance of 138mm, making it less suitable for Indian roads compared to SUVs.
• The Tesla Model Y, a better fit for India’s road conditions, is expected to cost between ₹50-60 lakh after import duties, significantly higher than M&M’s XUV 9e, which is priced at ₹33 lakh.
• UBS highlighted that Tesla’s competition in India will mainly be with premium EVs such as the Kia EV6, BYD Seal, and Hyundai Ioniq 5, all of which have struggled to gain traction in the Indian market, selling fewer than 200 units per month.
• According to UBS analyst Joseph Spak, Tesla’s India strategy is likely to remain import-driven in the near term, meaning that M&M will not face direct competition from Tesla in the mass-market EV segment.

UBS Raises M&M Target Price, Expects Strong Returns

UBS has revised its target price for M&M to ₹3,300, slightly lower than its previous estimate of ₹3,460, due to lower-than-expected EV sales.

• The brokerage continues to value M&M’s auto business at 15x 12-month forward EV/EBITDA, which is a 17% discount compared to Maruti Suzuki’s implied valuation at the target price.
• UBS has factored in battery EV (BEV) sales volumes of 42,000 units in FY26 and 50,000 units in FY27, acknowledging that higher average selling prices (ASPs) might impact margins.

M&M’s Resilient Business Model to Drive Long-Term Growth

Despite short-term market fluctuations and EV transition challenges, UBS remains bullish on M&M’s long-term growth prospects, citing:

1. Strong SUV demand: M&M’s market dominance in the domestic SUV segment is expected to continue, with new launches boosting sales.
2. Steady farm equipment revenue: The tractor segment remains a key revenue driver, showing consistent demand and minimal regulatory risks.
3. Controlled impact of Tesla: The high price of Tesla’s vehicles in India means that it won’t be a direct competitor to M&M’s affordable EVs.
4. Favorable valuation: The recent correction in M&M’s stock price has made it an attractive buying opportunity for investors.

With the Indian auto sector undergoing a transformation, M&M’s strong market presence, strategic investments, and growing product lineup put it in a position to deliver consistent growth in the coming years. Investors looking for long-term opportunities in the auto sector may find M&M to be a compelling option amid evolving market dynamics.