Auto major Mahindra and Mahindra’s shares gained on Tuesday, as investors on Dalal Street seemed excited with global brokerage Nomura pointing to the Mahindra Group auto firm's potential in the electric vehicles (EV) sector.
M&M shares rose 3.6 percent in intraday trade and were trading 3.2 percent higher at Rs 1266.35 on BSE at 2:25 pm, after falling for four straight sessions. M&M stock price has rewarded investors with more than a 52 percent return so far this year.
The rally in
M&M’s stock comes after Nomura’s latest report in which it said sports utility vehicles (SUV) should be the most attractive segment to launch EVs.
Large SUVs attract 50 percent goods and services tax (GST) compared with 5 percent for EVs and come with low or nil road taxes as well, the brokerage said. Therefore, in its view, this should be the most attractive segment to launch EVs.
Given the bigger size, Nomura expects M&M’s e-XUV400 to have a 40KWH battery size and starting price of Rs 1.8 million, similar to the Nexon EV Max. The company may consider a smaller battery size variant as well.
“Nexon EV sales are about 2000-3000 units per month now (15-20 percent total sales of Nexon models). The e-XUV400 has the potential to reach sales of 2000-3000 units per month,” the brokerage said.
According to Nomura, the upside potential is high if M&M continues its strategy of attractive styling and features along with a value for money proposition.
“A successful launch can give the market confidence on MM’s ability to succeed in the EV space, which can lead to a further re-rating,” it added.
The brokerage has a buy rating on the stock with a target price of Rs 1,505, which means it sees a 23 percent upside in the stock from Monday’s closing price of Rs 1226.40 on BSE.
