Microsec Capital has recommended 'Buy' on Mahindra & Mahindra with target price of Rs 1,362 with upside potential of 18% in its report.

Commenting on the investment rationale, the stock broker said, "The focus on the agricultural and infrastructure sector is on the agenda of the new government and which eventually lead to the development of the automotive and farm equipment sector as a whole. We expect that the increasing automotive and farm equipment segment activities result in the higher revenue generation for the company in the days to come. Higher revenue and better realizations would improve the margins of the company and boost the financials. Cyclical industries are expected to perform well under the new government and M&M likely to being a key beneficiary of the cyclical upturn in the economy.

At the CMP of Rs 1,158, the stock is trading at a P/E of 15.6x its FY14E EPS of Rs 74.4 and 13.6x its FY15E EPS of Rs 85.1. The company has sound business model and ROE is expected to pick up. We assign a P/E multiple of 16x to its FY15E EPS to arrive at a target price of Rs 1,362 for a time period of 12-15 months.

Slowdown economic is the key risk to the company. Lower auto and tractors sales may impact the company’s profitability. Insufficient monsoon volatile Rupee is a concern for the M&M."

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