Mahindra & Mahindra maintains mid-to-high teens growth guidance for FY26 for its SUVs

Mahindra & Mahindra’s (M&M) Q1FY26 standalone EBITDA margin at 14.3% was broadly in line with our estimate of 14.2% but below the Bloomberg consensus estimate of 14.5%. The auto division’s EBIT margin at 8.9% contracted 34bps QoQ as the company ramped up contract manufacturing for the ePV subsidiary Mahindra Electric Automobile (MEAL). Ex-of the ePV contract manufacturing segment, the core PV margin stood at 10%.

The farm division’s EBIT margin at 19.8% continued to impress, ahead of our estimate of 18.7%. It maintained its FY26 guidance for the SUV segment, to grow in the mid to high teens range. Going forward, we expect an increase in ePV contract manufacturing and recording of PLI benefits in subsidiaries, which would continue impacting the standalone auto business margins in the near to medium term.

However, this should improve financials of the EV subsidiaries. In the midst of a rare earth supply overhang, management clarified that it has sufficient inventory for the next two quarters as it has also evaluated light earth and ferrite solutions. We value the company on a SOTP basis, with the core business being valued at 19x Jun-27 EPS for a target price of Rs 3,520 and maintain ADD rating.

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Source: HDFC Securities Institutional Equities

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