The brokerage estimates M&M to post a compound annual growth rate of ~20%/ 13%/14% in revenue/EBITDA/PAT over FY26-28. M&M's Q2 FY27 net profit at Rs 5,100 crore was ahead of brokerage's estimates, led by higher-than-expected other income and beat on both segmental margins. On account of better-than-expected segmental margins and higher other income, Motilal Oswasl has increased its earnings estimate for FY27/FY28 by 7.5% each. On the back of its healthy launch pipeline and positive consumer sentiment, management provided a strong outlook for FY27E across segments: M&M utility vehicle at mid-to-high teens, and the light commercial vehicle industry at double digits.
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Motilal Oswal Report
Motilal Oswal has reiterated its Buy rating on Mahindra and Mahindra Ltd. and has set a target price of R 3,850, based on FY28E SoTP. The target price implies a potential upside of up to 23%.
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The brokerage estimates M&M to post a compound annual growth rate of ~20%/ 13%/14% in revenue/EBITDA/PAT over FY26-28.
M&M's Q2 FY27 net profit at Rs 5,100 crore was ahead of brokerage's estimates, led by higher-than-expected other income and beat on both segmental margins.
On account of better-than-expected segmental margins and higher other income, Motilal Oswasl has increased its earnings estimate for FY27/FY28 by 7.5% each.
On the back of its healthy launch pipeline and positive consumer sentiment, management provided a strong outlook for FY27E across segments: M&M utility vehicle at mid-to-high teens, and the light commercial vehicle industry at double digits.
While M&M did cut tractor guidance from mid-single digits to flat for FY27, the brokerage has already factoring the same into its numbers.
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M&M Q2 Results Highlights
- M&M's Q2 standalone revenue grew 27% YoY to ~Rs 42,500 crore, broadly in line with brokerage's estimates, driven primarily by a strong ~15% growth in blended average selling prices and a 11% YoY growth in volumes.
- Raw material costs came in higher than expectations, resulting in gross margins dipping 360 bp YoY to 20.8% (estimated 21.5%).
- EBITDA margins came in line with estimates at 11.7% (estimated 11.5%).
- EBITDA grew by 1.8% YoY to Rs 4,950 crore which was inline with brokerage's estimate.
- Auto segment's revenue grew 36% YoY to Rs 33,900 crore (in line), while PBIT margins at 7.7% beat our expectations of 7.1%.
- Farm revenue was flat YoY at Rs 8,590 crore, while farm PBIT margin beat expectations at 16.8% (vs est. of 16%).
- Other income was above brokerage's estimate at Rs 2,830 crore due to a higher-thanexpected dividends received from subsidiaries.
- Consequently, PAT exceeded our estimate, up 13% YoY to Rs 5,100 crore (estimated Rs 4,500 crore).
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