Sequentially, the numbers may be weak from lower tractor-numbers in the sales mix
Mahindra & Mahindra (M&M) is expected to see a 28 to 29 per cent year-on-year (YoY) rise in revenue, in the quarter ending March, according to analyst estimates. Forecast on its net profit growth varies widely, with brokerages expecting it to increase anywhere between 39 percent and 67 percent.
But its quarter-on-quarter performance is expected to be weak, with revenue growing between 1.1-1.8 per cent and net profit decreasing by around 10 to 20 per cent. This is from a lower tractor mix in its total sales.
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The largest tractor manufacturer in India, M&M has a market share of 40 percent in this auto segment. “M&M’s Q4 margin to decline QoQ due to lower tractor mix,” noted analysts at HDFC Securities, who have a ‘buy’ call on the stock and list it among their top picks in the auto sector.
Brokerages are expecting revenue to be between Rs 21,890 crore and Rs 22,042 crore, and net profit to be between Rs 1,620 crore and Rs 1,948 crore.
M&M is declaring its results on May 26.
Jefferies, which has a hold call on the stock, said that tractors had a long up-cycle in FY17-23, with volumes growing at 10 percent CAGR over seven years, and that they see a “high risk of a tractor downturn, given the elevated base after an elongated upturn”. They have factored in MM’s tractor volumes falling 15 percent in FY24E.
The analysts wrote that the company “benefited from a favourable mix as a share of higher-margin tractors rose from 35 percent in FY15-20 to 38-50 percent in FY21-9MFY23”. They expect a share of tractors to fall to 28-30 percent in FY24-FY25, posing a headwind for margins. They have factored in an EBITDA margin of 11.8 percent in FY24-25E (9MFY23: 12.3 percent).
Also read: M&M’s new EV business to be value accretive: Nomura
The brokerage’s analysts also noted how the company’s SUV franchise has improved with recent launches. Though its SUV market share fell from 55 percent in FY12 to 14.7 percent in FY21, it has since improved to 17.5 percent in 9MFY23. “Strong order book and capacity expansion should drive 20 percent SUV volume CAGR over FY23-25E,” they wrote in a brokerage report.
The brokerage estimates that the auto major’s total volumes will rise at 7 percent CAGR over FY23-25E.
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