Mahindra & Mahindra gains over 1% on hike in vehicle prices

NEW DELHI: Mahindra & Mahindra Ltd surged over 1 per cent in morning trade on Friday after the auto major increased the prices of its utility vehicles (ex. Quanto) by over 2 per cent with immediate effect to pass on the excise duty hike announced in the Union Budget.

At 10:12 am, M&M was trading 1.3 per cent higher at Rs 883.00. It has hit a low of Rs 860.05 and a high of Rs 883.00 in trade today.

The Finance Minister in the Union Budget 2013-14 has increased the excise duty on large SUVs to 30 per cent from 27 per cent earlier. The entire utility vehicle portfolio of M&M (ex. Quanto) would be impacted as they are qualified as large SUVs and would attract higher duty.

A SUV is defined as a vehicle which has a length greater than 4,000 mm and engine displacement exceeding 1,500cc.

"The immediate increase in prices by the company is on the expected lines and has been undertaken to protect margins. We do not see a material impact of the recent price hike on the company's volumes and expect them to grow at a healthy rate of 12% in FY2014," Angel Broking said in a report.

"After the recent correction in the stock price, the stock is trading attractively at 13.5x FY2014E earnings and we therefore recommend a 'buy' rating on the stock with a SOTP based target price of Rs 1019," added the brokerage firm.