PL First Cut - Mahindra & Mahindra 2QFY24

PL First Cut – Mahindra & Mahindra 2QFY24 – Himanshu Singh – Research Analyst, Prabhudas Lilladher Pvt Ltd

Mahindra & Mahindra | MM IN | TP: INR 1,775 | BUY]

First Cut 2QFY24 results – mixed performance; miss on revenue, margins in line

Revenue grew by ~16% YoY, helped by volume growth of c11% but came below our and Bloomberg consensus estimates (BBGe). EBITDA margins at 12.6% were largely in line with BBGe (12.7%) but came lower than PLe (12.9%). Gross margin improved by ~90bps YoY but was slightly lower QoQ (30bps) given lower Tractors mix, but largely in line with expectation. Higher than expected employee costs was the main source for EBITDA margin miss as other operating expenses came largely in line. Higher other income (which included dividends from subsidiaries and income from other investments) and lower interest expenses led to the significant PAT beat.

On the automotive segment side, Revenue was lower than expected on lower realisation side however, EBIT margins have expanded by 150bps QoQ to 9.0% vs our expectation of 8.4%. On the Farm Equipment side, we saw revenues coming in higher than expected while margins were lower than estimates contracting QoQ by 150bps to 16% (PLe: 17.5%)

Other comments:

Open bookings of SUV at 286k (as on 1st November 2023), reflecting continued strong demand

Mega launch of Oja and Naya Swaraj in 2Q

Farm machinery revenue Rs 2230mn , up 35%; No 2 in Rotavators market share estimated at 21.5%

PL View:

Overall, standalone numbers were mixed in performance missing on revenue while in line margins. Automotive division saw significant improvement in margin performance and came higher than expected while weakness in tractor volumes and likely higher contribution from the margin dilutive farm machinery segment and launch costs from the mega launch of Oja and Naya Swaraj impacted margins for the Farm Equipment segment during the quarter. We will circle back with more details post the analyst meet today.

Financial performance vs PLe:

Volumes grew YoY by 10.6%, was flattish QoQ by 0.3%,

Revenue grew YoY by 15.7% to Rs. 243bn, was flattish QoQ by 1.1%, and missed PLe by -4.3%

EBITDA grew YoY by 22.8% to Rs. 31bn, de-grew QoQ by -5.2%, and missed PLe by -6.4%

APAT grew YoY by 49.1% to Rs. 35bn, and QoQ by 35.9%, and beat PLe by 16.4%

EBITDA margin expanded YoY by 73 bps to 12.6%, contracted QoQ by -84 bps, and was lower vs PLe by -29bps

Revenue per unit grew YoY by 4.6%, was flattish QoQ by 0.7%, and missed PLe by -4.3%

EBITDA per unit grew YoY by 11%, de-grew QoQ by -5.5%, and missed PLe by -6.4%