M&M 2700 CE Recommended abv 89, Sl 81, Trgt 95-105.

The company announced the launch of its latest light commercial vehicle (LCV), the Mahindra Veero. Market participants reacted positively to the news, betting that the Veero could enhance the company’s foothold in the commercial vehicle market.

Analysis

The Indian Auto Industry comes in the top 5 largest auto industries in the world. India is also a prominent auto exporter and has strong export growth expectations for the near future. The support from the government is providing the auto companies with a boost needed in their development. But will it sustain?

We can look into more details and dig a little deeper into the analysis of the stock of this sector. Mahindra & Mahindra’s stock price today is Rs 2798. Let’s look at how Mahindra & Mahindra is performing and if it is the right time to buy the stock of Mahindra & Mahindra with detailed analysis.

• The mainstream of revenue for the Auto Sector is their sales, Mahindra & Mahindra has reported decent sales growth of 16.25 %, and in the latest quarter sales were Rs 27,132.76 Cr. To judge whether the company’s inventory is being sold or not and whether the sales picture is true, the inventory turnover ratio plays a major role, which is 11.23 times for Mahindra & Mahindra. It is managing its inventory poorly.  
• Mahindra & Mahindra reported Profit growth of 63.66 % over the year, where the latest year profit is Rs 10,717.80 Cr compared to the previous year of Rs 6,548.64 Cr. The new permits by governments and increasing demand will lead to an increase in profits in the coming year. 
• The operating profit of Mahindra & Mahindra in the latest quarter is Rs 4,116.19 Cr. It helps in measuring the company’s operating performance which is used to make financing decisions. 
• Mahindra & Mahindra has a healthy ROE of 22.55 %. The ROE is an important financial parameter because Auto companies work with high equity investments. Also, they have to take huge debt to incur the research and manufacturing work so their Debt to Equity ratio should be evaluated. Mahindra & Mahindra has a low Debt to Equity ratio of 0.03. 
• Mahindra & Mahindra pays a dividend of 21.10 Rs per share. It tells us that a company likes to share profits with its shareholders. The dividend yield is low at 0.75 %. 
• The share of promoters in Mahindra & Mahindra is low at 18.56 %, where the pledging is 0.06 %. 
• What the market is willing to pay for the company for its earnings can be determined by PE multiple. The current PE of Mahindra & Mahindra is 32.96 compared to the 5-year average PE of 36.91.

Technically, the stock moved above the previous day’s high 2759, and traded with a positive momentum backed by the news, hence recommended ATM Call option for the short target.