Mahindra & Mahindra Ltd (M&M), on May 16 reported its fiscal fourth quarter earnings with standalone net profit growth of 32 per cent to Rs 2,038 crore. In the same period of last year, it had reported a standalone net profit of Rs 1,549 crore. In Q4FY24, the domestic automaker’s standalone revenue from operations increased by 11 per cent to Rs 25,109 crore from Rs 22,571 crore the previous year.
Regarding operations, M&M’s Q4FY24 EBITDA increased by 12 per cent on-year to Rs 3,119 crore from Rs 2,789 crore, with the EBITDA margin staying constant at 12.4 per cent.
M&M’s car segment volumes were 2,15,280 units at the end of the March 2024 quarter, up 14 per cent year over year. During the same period, its farm equipment business sold 71,039 tractors, recording a 20 per cent YoY decrease.
Let’s have a look at what the brokerage firms have to say on this…
ICICI Securities believes that auto EBIT margin came in at 8.8 per cent against 8.3 per cent in Q3FY24 driven by improving scale, mix and pricing. With Thar/XUV 700/Bolero adding fresh orders to the tune of approximately 7k/8k/9.5k units per month, brand Scorpio adding 17k units of order/ month and 50k open booking for XUV3XO, M&M is looking forward to monthly UV production capacity expansion to 64k units by FY25-end and 72k units by FY26-end, from present levels of around 49k units.
According to Elara Capital, M&M’s order book was reduced to 220k units as on 1 May versus 226k as on 31 Jan 2023. The order intake for the new XUV 3XO was approximately at 50k in the first hour of booking opening, as per management. Through FY 25-27, M&M has earmarked a capex of Rs 270 billion for Auto business, Rs 50 billion for farm and Rs 50 billion for services, taking the overall capex to Rs 370 billion. On the UV side, MM targets Q4FY25 exit production capacity of 64,000 vehicles per month. In FY25, MM targets mid-to-high teen growth for its SUV portfolio. And for tractors, it expects 5 per cent growth in FY25. Q1 volumes should remain weak owing to elections.
Investment plans
Solid model launch and capacity plans give visibility that M&M again guided for UV sales volume growth of mid- to high-teens in FY25, says analysts from BNP Paribas. It expects tractor volume growth of c5 per cent, with recovery in 2HFY25 led by a low base, good monsoon and improving trade terms for farmers. M&M exited FY24 with capacity of 49k/month and targets 72k/month by FY26 exit, 10k of which will be for EVs. It lined up Rs 270b/ Rs 50b investment for Automotive/FES for the FY25-27 cycle. “We see M&M’s production ramp up improving in FY25 along with new model launches. We also see M&M offering a differentiated BEV as a near-term catalyst, helping it build on its success amongst the urban affluent customer base,” said BNP Paribas.
Pricing action and improved mix helped in strong tractor realisation
Experts at Prabhudas Lilladher say that the decline in the company’s tractor sales by 20.3 per cent YoY has impacted its revenue to decline by 13.1 per cent YoY to Rs 52.3 billion. However, pricing action as well as improvement in mix and favourable input costs aided in strong realisation growth of 8.9 per cent YoY/10.1 per cent QoQ to Rs 736k/unit. Consequently, its core tractor margin improved sequentially from 16.9 per cent in Q3FY24 to 17.6 per cent.
M&M was also upbeat on new launches with 9 ICE SUVs, 7 BEVs, 7 LCV models by 2030, especially with strong initial customer response for the XUV 3XO. Experts believe that MM’s production ramp up in FY25 along with new model launches along with the company offering a differentiated BEV as a near-term catalyst, helping it build on its success amongst the urban affluent customer base.