Buy Mahindra and Mahindra; target of Rs 1040: Edelweiss

Edelweiss' research report on Mahindra and Mahindra

At the recent Farm Equipment Segment (FES) investor day, Mahindra & Mahindra (M&M) management: (1) shed light on its ambition in the global agri-machinery space; 2) made a commitment to improve EBIT margin of the global FES business from -1% to 5% over the medium term (this would add 3–5% to consolidated profit in our view); 3) indicated strong underlying demand in the domestic market with tractor penetration at only 40% of the peak potential of 16.2m tractors; and 4) showcased digitization initiatives to facilitate customer experience.

Outlook
The FES investor day along with Auto Day held earlier vindicates our thesis (Has its time come?) that M&M is on track to address the two key investor concerns — UV and profitability of subsidiaries. Maintain ‘BUY’.

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