BOB Capital Markets (BOBCAPS) has reiterated its BUY call on Mahindra & Mahindra (M&M) with a revised target price of Rs 4,625, implying an upside potential of nearly 26% from the current market price of Rs 3,675. The research note underscores robust growth across automotive and farm equipment segments, margin resilience despite commodity pressures, and a well-articulated capacity expansion roadmap. Revised earnings estimates, structural premiumisation, EV scaling, and disciplined capital allocation form the backbone of the upgraded valuation framework. The brokerage continues to value the core business at 24x one-year forward earnings, assigning additional value to subsidiaries under a sum-of-the-parts methodology.

Robust Volume Momentum Anchors Revenue Expansion

Blended volumes surged 22% year-on-year in Q3FY26 to approximately 4.48 lakh units, sustaining topline momentum across automotive and farm equipment segments. Revenue rose 26% YoY to Rs 3,85,168 million, supported by operating leverage and modest realisation gains of 3% YoY per vehicle.

The improvement in blended realisations to nearly Rs 8.59 lakh per vehicle reflects favourable product mix, especially higher horsepower tractors and premium SUV variants. This structural premiumisation trend is increasingly becoming a defining characteristic of M&M’s revenue profile.

Automotive Leadership Strengthens Across Segments

Auto revenue expanded 27% YoY, with SUV market share approaching 24% and revenue share rising materially. The light commercial vehicle (LCV <3.5T) segment recovered sharply, delivering 20% volume growth and improving market share beyond 51%.

Electric vehicles remain a strategic growth vector. Cumulative e-SUV sales have crossed 41,000 units, translating into a run rate of roughly 4,000 units per month. Management is scaling EV production capacity to 7,000–8,000 units per month by CY26, signalling confidence in sustained demand.

Auto EBIT climbed 24% YoY to Rs 26.8 billion, aided by operating leverage and richer product mix. Standalone EBITDA margin expanded to 14.7% versus 14.6% a year earlier, demonstrating resilience despite commodity inflation.

Farm Equipment Business Delivers Margin Breakout

The Farm Equipment Segment (FES) remains a formidable profit engine.

Tractor volumes grew 23% YoY, while farm equipment revenue advanced 25% YoY in Q3FY26. Market share stood at 44.1% year-to-date FY26, underscoring continued leadership.

Core tractor PBIT margin expanded sharply to 21.2% from 16.9% YoY, reflecting operating leverage and premiumisation through higher HP and 4WD variants.

FES EBIT surged 39% YoY to Rs 20.6 billion, supported by favourable monsoon patterns, reservoir strength, and government farm initiatives.

While FY27 may witness moderation due to a high base, structural rural demand drivers remain intact.

Quarterly Financial Snapshot: Margin Expansion Visible

Below is a summary of standalone Q3FY26 performance:

Source: Company, BOBCAPS Research

Estimate Revisions Signal Earnings Acceleration

BOBCAPS has revised its EBITDA estimates upward by 6%, 5%, and 8% for FY26E, FY27E, and FY28E respectively. EPS revisions stand at 6%, 6%, and 9% across the same horizon.

Key forecast assumptions:

Source: BOBCAPS Research

The brokerage expects a 3-year PAT CAGR of roughly 21%, reflecting strong operating leverage and mix improvement.

Capacity Expansion to Support Structural Growth

M&M has outlined a phased capacity expansion strategy:

Phase I (CY26): Additional 6,000–7,000 ICE units per month by August 2026.
Phase II (CY27): New Chakan facility ramp-up for NU_IQ platform.
Phase III (CY28): Nagpur greenfield project adding 100,000 tractor units annually.

This proactive capacity augmentation enhances revenue visibility and safeguards market share leadership.

Valuation Framework and Target Price

BOBCAPS continues to value the core business at 24x one-year forward EPS, representing a 10% premium to its long-term average of 22x.

The valuation breakdown is as follows:

Source: BOBCAPS Research

At the current price of Rs 3,675, the stock trades at 27.3x FY26E earnings and 23.8x FY27E earnings, offering valuation comfort relative to earnings growth.

Key Risks to Monitor

Investors should remain mindful of:

• Sustained commodity inflation impacting margins.
• Aggressive competitor launches in premium SUVs.
• Slower-than-anticipated moderation in farm demand.

Investment Conclusion

Mahindra & Mahindra is firing on all cylinders — automotive dominance, accelerating EV adoption, farm equipment margin breakout, and disciplined capital allocation collectively underpin the investment thesis.

With structural premiumisation, expanding export footprint, and a healthy balance sheet carrying negligible leverage, the company appears well positioned to deliver superior shareholder returns over the next three years.

At a target price of Rs 4,625, BOBCAPS maintains its BUY recommendation, projecting meaningful upside backed by earnings acceleration and multiple stability.

Disclaimer: Investors should conduct their own due diligence and assess risk tolerance before taking investment decisions. Equity markets are subject to volatility, and forward-looking estimates may be influenced by macroeconomic and sector-specific developments.