Earnings Outlook
Tractors, SUVs to provide smooth ride by M&M in Oct-Dec
This story was originally published at 15:40 IST on 3 February 2025
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By Narayana Krishna
HYDERABAD - Robust sales in tractors and passenger vehicles are likely to give a smooth ride to automobile major Mahindra & Mahindra Ltd. in the December quarter. The company is expected to report decent earnings numbers with improved margins for the quarter compared to peers, according to analysts.
Mahindra group's flagship company is projected to report a 29% year-on-year growth in its net profit to INR 31.7 billion and a 20% on-year rise in revenue to INR 308.9 billion, according to an average of estimates of 12 brokerages. Sequentially, the company's net profit is seen falling 18% due to higher discounts, while revenue is projected to rise 7%, analysts said.
The estimates for M&M's net profit range from INR 28.3 billion by HSBC Global Research to INR 41.0 billion by JM Financial Institutional Securities Pvt. Ltd. Revenue projections range from INR 302.6 billion by YES Securities Ltd. to INR 314.9 billion by JM Financial. The company is scheduled to announce its Oct-Dec earnings on Friday.
On Monday, shares of M&M ended at INR 3,173.30 on the National Stock Exchange, up 3.1% from its previous close. The stock price of the tractor-to-sports utility vehicle manufacturer has risen 9.8% since it announced the September quarter results on Nov. 7.
HSBC Global Research in its pre-earnings note said 2024 was a successful year for M&M led by growth in its SUV sales. Its blockbuster model Thar Roxx got 175,000 bookings within 60 minutes of the opening of the booking, marking a significant development for the company, the brokerage said. HSBC assigned a 'buy' rating on the stock with a target price of INR 3,390 a share, considering visible volume growth in both the passenger vehicles and the tractors segments.
Brokerage Motilal Oswal said a 17% on-year growth in other automobiles and a 20% on-year increae in tractor volumes for the December quarter will lift the M&M numbers and help the company to post decent margin improvement. While the tractor segment margins are expected to improve 100 basis points quarter-on-quarter to 18.5%, auto segment margins are set to decline 50 bps to 9% due to high discounts and increased promotional spending in Oct-Dec, the brokerage said.
Kotak Institutional Equities has projected the company's December quarter revenue to increase by 21% on year, led by 26% on-year growth in tractor segment revenues mainly due to a 20% increase in volumes, and 19% increase in automotive segment revenues. Automobile segment growth will be led by a 17% on-year increase in volumes SUV sales and exports, the brokerage said.
Most analysts expect M&M December quarter earnings before interest, tax, depreciation and amortisation margins to expand led by volume growth and richer product mix. "We estimate overall EBITDA margin to improve by 200 basis points on year led by richer segmental mix, mainly higher mix of tractor segment, operating leverage benefit and cost control measures," Kotak, which expects an EBITDA margin of 14.8% for the quarter, said.
The EBITDA is pegged at INR 45.06 billion, according to the average of estimates of 12 brokerages. The lowest estimate for EBITDA is INR 42.7 billion by HSBC Global and the highest is INR 47.6 billion by JM Financial.
Following are the Oct-Dec earnings estimates for Mahindra & Mahindra based on reports from 12 brokerage firms in descending order by the estimate of net profit:
|
Brokerage name |
Net Sales |
Net Profit |
EBITDA |
|
-------(In INR million)------- |
|||
|
JM Financial Institutional Securities Pvt Ltd |
314,903.00 |
41,040.00 |
47,550.00 |
|
Nirmal Bang Equities Pvt Ltd |
307,255.00 |
32,559.00 |
46,088.00 |
|
Kotak Institutional Equities |
305,197.00 |
32,485.00 |
45,114.00 |
|
Motilal Oswal Financial Services Ltd |
312,328.00 |
31,977.00 |
44,473.00 |
|
Emkay Global Financial Services Ltd |
312,253.00 |
31,319.00 |
44,652.00 |
|
Elara Securities (India) Pvt Ltd |
308,014.00 |
31,294.00 |
44,970.00 |
|
Prabhudas Lilladher Pvt Ltd |
312,042.00 |
31,093.00 |
44,778.00 |
|
Incred Research Services Pvt Ltd |
310,352.00 |
30,717.00 |
45,642.00 |
|
Nuvama Wealth Management Ltd |
310,856.00 |
30,295.00 |
45,807.00 |
|
YES Securities (India) Ltd |
302,570.00 |
30,238.00 |
44,181.00 |
|
Nomura Equity Research |
306,893.00 |
28,790.00 |
44,787.00 |
|
HSBC Global Research |
304,696.00 |
28,319.00 |
42,657.00 |
|
Average |
308,946.58 |
31,677.17 |
45,058.25 |
End.
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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