M&M Q4 Results Preview: Roaring SUV Sales To Lift Profit In ‘Noisy’ Quarter

Mahindra & Mahindra Ltd.'s profit is expected to expand by a third in the January-March on buoyant sport utility vehicle sales but its new electric vehicles could dent margins.

Standalone net profit of India's largest SUV maker by revenue likely rose 22% year-on-year to Rs 2,490 crore in the three months ended March 31, on the back of a strong 20% increase in revenue to Rs 30,024 crore, according to analyst estimates compiled by Bloomberg.

The operational profitability—calculated as earnings before interest, tax, depreciation and amortisation—was likely up 30% year-on-year at Rs 4,205 crore, with a margin that is seen expanding 160 basis points to 14%.

One basis point is one hundredth of a percentage point.

M&M Q4 Preview (Standalone, YoY)

• Revenue seen 20% higher at Rs 30,024 crore versus 25,109 crore.

• Ebitda seen 30% higher at Rs 4,205 crore versus 3,119 crore.

• Margin seen expanding 110 basis points to 14% versus 12.4%.

• Profit seen 22% higher at Rs 2,490 crore versus 2,038 crore.

The solid performance comes on the back of SUV sales that increased 18.26% year-on-year to 23,027 units in January-March. That compares with India's wider SUV space that grew 6.7% and car sales which shrunk 4.5%.

“We believe M&M will report a strong set of results on the back of an increase in SUV and tractor volumes on YoY basis,” CLSA said in a note. “Additionally, we expect management's commentary on tractors to be positive along with strong booking momentum on recently launched BEVs (battery electric vehicles).” CLSA expects M&M's EBITDA margin to expand by 91 bps QoQ, driven by a decline in tractor volumes by 27.7% QoQ.

That encapsulates what was an otherwise “noisy” quarter for M&M, according to BofA Securities.

“Among 4W OEMs, It will be a noisy quarter for M&M as BEV dispatches will kick in, which will weigh on auto margins and impending restructuring in the farm subsidiary. That said, underlying earning growth is still solid at 24% YoY. We model EBIT margin at 9% (9.7% in Q3) for autos and 17.1% for tractors.”

Goldman Sachs seemed to agree.

The launch of Mahindra's electric SUVs may cause some initial dilution before picking up once again after production-linked incentives start supporting profitability.

A key risk, according to Goldman Sachs, would be the inability to set up sufficient capacity on recent successful launches, cancellations due to long waiting periods on overbooked models, and cyclicality around the tractor business. Investors would also like more clarity on the Mahindra-SML Isuzu deal and strategy on tackling higher competition if India slashes import duty on cars as part of a trade deal with the US.

Still, JPMorgan is overweight on the stock, due to continued strength in the SUV space and a strong order book, and market share gains in tractors.

“We believe better capital allocation and a turnaround in subsidiaries should continue to drive improvement in ROEs and a potential increase in cash return to shareholders,” said  JPMorgan in a note.

“We increase our FY25-27/EBIT forecasts by 1-3% to factor in the better-than-expected volumes for SUVs and tractors. We cut our FY26 price target slightly to Rs 3,460 from Rs 3,480 on account of a reduction in subsidiary valuation.”