Mahindra and Mahindra Ltd.'s Q4 FY25 standalone Ebitda margin at 14.9% was above the brokerage's estimate of 14.1% and Bloomberg consensus estimate of 14.0%. The auto division's Ebit margin at 9.2% was broadly in line with estimate of 9.1%. Margin contracted 44bps QoQ as the company commenced contract manufacturing for its ePV subsidiary Mahindra Electric Automobile Ltd . Ex-of the ePV contract manufacturing segment, the core PV margins stood at 10.0%.
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HDFC Securities Institutional Equities
M&M - Core business set for another strong growth year
Mahindra and Mahindra Ltd.'s Q4 FY25 standalone Ebitda margin at 14.9% was above our estimate of 14.1% and Bloomberg consensus estimate of 14.0%. The auto division's Ebit margin at 9.2% was broadly in line with our estimate of 9.1%. Margin contracted 44bps QoQ as the company commenced contract manufacturing for its ePV subsidiary Mahindra Electric Automobile Ltd . Ex-of the ePV contract manufacturing segment, the core PV margins stood at 10.0%.
The farm division's Ebit margin at 19.4% was impressive, ahead of our estimate of 17.0%. Margin expanded 135bps QoQ despite a 28% decline in volume.
Management credited the higher margin to better product mix, lower commodity prices, lower competitive intensity and better dollar realization from exports. It has guided for the tractor industry to grow in high single digits in FY26 and for its SUV segment to grow in the mid to high teens range in FY26.
Going forward, we expect an increase in ePV contract manufacturing and recording of PLI benefits in subsidiaries to continue, impacting the standalone auto business margins over the near to medium term.
However, this should improve the financials of the EV subsidiaries. We also believe that the tractor business benefitted from a confluence of positive factors, which may be difficult to sustain at the same levels, going forward. We value the company on a SOTP basis, with the core business being valued at 19x Mar-27 EPS for a target price of Rs 3,386 and maintain our Add rating.
CDSL - Weak quarter; investing in tech for the future
Central Depository Services Ltd. posted a weak set of numbers for the second consecutive quarter and the revenue decline of 19% QoQ was higher than our estimate of a 10% decline. This decline was due to a drop in transaction charges, lower KYC revenue, and a fall in IPO revenue. The drop in transactions was a function of volume decline, while the online data charges decline was due to a drop in account additions and lower fetches.
The demat account additions stood at 6.4mn in the quarter vs ~9.2 million in Q3. However, CDSL continues to maintain its leadership position with a 79.5% market share and ~90% incremental share. The annuity revenue stream is stable and constitutes ~39% of the revenue.
The increase in the number of folios for the current fiscal will reflect in Q1 FY26E numbers, and the annuity revenue will remain strong for FY26E. The weakness in market-linked revenue will lead to a growth slowdown in FY26E following two years of strong growth.
The margin decline in the quarter was due to the revenue drop and elevated tech expenses, and the company intends to keep investing in technology to maintain its competitive edge.
We cut our revenue estimate by ~4/3% for FY26/27E, led by market weakness, and EPS estimates by ~5/4% due to the margin drop. We expect growth to moderate in FY26E and Ebitda margin to be at ~56%.
We maintain our Add rating with a target price of Rs 1,180, based on 38x FY27E EPS. The stock is trading at a P/E of 52/42x FY26/27E EPS.
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