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Informist, Monday, Jul 29, 2024

 

By Darshan Nakhwa 

 

MUMBAI – Mahindra & Mahindra Ltd is expected to report strong growth in topline and cash profit from operations for the June quarter, on account of higher volumes, price hikes, and moderation in raw material costs. The automaker's topline is projected to grow 15.5% on year to 281.47 bln rupees, according to the average of estimates from nine brokerages.

 

The Mumbai-based company's earnings before interest, tax, depreciation, and amortisation are seen at 39.01 bln rupees, representing a growth of 20.6% on year, as per the average of estimates from eight brokerages. The highest and lowest estimates for EBITDA are 40.54 bln rupees and 37.78 bln rupees, respectively. The highest projection for the company's Apr-Jun topline is 289.57 bln rupees and the lowest is 275.09 bln rupees.

 

Further, M&M is expected to report an expansion of 40 basis points on year in EBITDA margin to 13.8%, according to the average of estimates from seven brokerages. Factors such as richer product mix--led by high-margin tractor and commercial vehicle volumes--and lower raw material costs, are expected to aid the company's on-year EBITDA margin expansion.

 

During the quarter, M&M's cost of raw materials consumed as a percentage of revenue is expected to decline to 74% from 75.3% in Apr-Jun 2023, according to Motilal Oswal Financial Services. In terms of average selling price per unit, the realisation per unit is projected at 842,000 rupees compared to 799,000 rupees in the year-ago period.

 

Even as these three metrics are seen growing on year, M&M's bottomline is seen flat on year at 27.90 bln rupees, according to the average of nine estimates. The net profit estimates range from 32.50 bln rupees to 23.73 bln rupees.

 

Even on a sequential basis, M&M is likely to post strong growth in key earnings metrics on account of mid-teens growth in overall sales. While the automaker's bottomline for the reporting quarter is projected to surge 37% from 20.38 bln rupees in Jan-Mar, its topline is seen up by nearly 11% from 254.36 bln rupees. The company's EBITDA for Apr-Jun is likely to grow by 20.4% from 32.40 bln rupees, and EBITDA margin is seen expanding by 90 bps from 12.9% for the March quarter.

 

The company's EBITDA margin is expected to expand on quarter due to a richer product mix, which will partly offset the impact of higher raw material prices and advertisement spending, according to analysts. In Apr-Jun, tractor sales accounted for 37% of the company's overall volumes, compared with 25% in the March quarter.

 

In Apr-Jun, prices of aluminium, copper, lead, and rubber rose 6-16% on quarter. However, prices of domestic and Chinese cold rolled coil steel were down 1.2% and 8.1%, respectively. On a year-on-year basis, prices of domestic cold rolled coil steel, aluminium, lead, copper, and rubber declined 2-31%, according to data from Kotak Institutional Equities. 

 

VOLUME GROWTH

In Apr-Jun, M&M's overall despatches, including automobiles and tractors, rose 10.6% on year, and 16.1% sequentially, to 333,017 units. The automaker sold a total of 211,550 automobiles, including passenger and commercial vehicles, and three-wheelers, during the quarter. In the farm equipment segment, it registered sales of 121,467 tractors.

 

The company's passenger vehicles despatches in India in Apr-Jun comprised 124,248 utility vehicles. It registered growth of 24% on year but a decline of 1.5% sequentially in segment volumes.

 

On the commercial vehicles front, the company sold 62,522 units in India, registering a growth of 2.1% over Apr-Jun 2023 and 7% over the March quarter. The company reported growth in commercial vehicle despatches on a soft base of the year-ago period, when segment sales were affected after the introduction of a new emission norm, due to which prices of these vehicles were raised to offset higher production cost. 

The automaker's three-wheeler sales fell marginally on year but were up by 3.3% sequentially to 17,655 units in the June quarter. During the quarter, the company exported 7,125 units, marking an increase of 2.8% on year and 46.7% sequentially.
 

M&M is scheduled to detail its earnings for the June quarter on Wednesday. Today, shares of the company ended at 2,933 rupees on the National Stock Exchange, up 1.6%. The company's stock has gained nearly 27.4% since its March quarter earnings.

 

Following are the Apr-Jun standalone earnings estimates for the company, in million rupees, based on reports from nine brokerages:

 

Brokerage	Net Sales	Net Profit	EBITDA
Elara Securities (India) Pvt Ltd	288,979	25,941	39,590
Emkay Global Financial Services Ltd	289,569	32,502	40,540
ICICI Securities Ltd	276,404	29,579	39,929
Kotak Institutional Equities	275,095	23,729	37,776
Motilal Oswal Financial Services Ltd	281,000	29,800	39,000
Nuvama Wealth Management Ltd	280,977	24,929	38,117
Prabhudas Lilladher Pvt Ltd	280,460	28,513	37,862
Sharekhan Ltd	278,060	28,300	----
YES Securities (India) Ltd	282,683	27,799	39,293
Average	281,470	27,899	39,013

 

End

 

Edited by Aditya Sakorkar

 

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