M&M Q2 Results Preview: Strong Topline Growth Eyed; Discounts, Costs May Trim Margins

Mahindra & Mahindra Ltd. is set to announce its second quarter results on Tuesday. The auto giant is expected to report a strong rise in revenue for the September quarter, helped by healthy demand for passenger vehicles (PVs) and a recovery in tractor sales.

However, higher discounts, cost pressures and an unfavourable product mix could weigh on profit margins, according to analysts. As per Bloomberg estimates, M&M’s standalone revenue for the second quarter of this fiscal is seen rising 17.2% year-on-year to Rs 33,886 crore, compared to Rs 28,919 crore last year.

Net profit is expected to increase by 5.6% to Rs 3,979 crore. However, Operating income, or earnings before interest, taxes, depreciation, and amortization may decline 8.7% to Rs 4,811 crore, and margins are likely to narrow to 14.2% from 18.2% a year ago.

• Revenue seen up 17.2% to Rs 33,886.55 crore vs Rs 28,919.34 crore.

• Ebitda seen down 8.7% to Rs 4,810.76 crore vs Rs 5,270.25 crore.

• Ebitda Margin seen at 14.2% vs 18.2%.

• Net profit seen up 5.6% at Rs 3,978.92 crore vs Rs 3,768.58 crore.

Brokerages expect mixed performance across segments. UBS said M&M could continue to outperform peers, supported by strong passenger vehicle volumes and steady tractor growth. JPMorgan is also more optimistic, forecasting 20% year-on-year Ebitda growth led by the tractor segment, with Escorts (ESC) expected to post an impressive 51% jump.

BofA Securities expects operating profit to rise 19% year-on-year, aided by an early festive season that lifted tractor sales (EBIT up 48% year-on-year). However, auto EBIT growth may remain modest at 8%, with margins slipping due to higher promotional offers and an increasing share of electric vehicles (EVs). BofA values M&M at Rs 4,000 per share, factoring in growth potential from the farm equipment business and subsidiaries.

HSBC noted that while auto volumes grew 5% quarter-on-quarter, tractor sales declined 8% but rose about 32% year-on-year. It added that discounts increased across models, up to Rs 1.3 lakh for the Bolero, and that average selling prices fell about 3% sequentially due to a weaker product mix and festive schemes.

The share of utility vehicles dropped by 550 basis points to 56%, while tractor volumes made up around 32% of total sales. Rising input costs for copper, aluminium and precious metals also added pressure.

HSBC expects M&M’s EBITDA margin to fall by 60 basis points quarter-on-quarter, with both auto and farm divisions seeing a dip in profitability. Despite near-term headwinds, analysts remain positive about the company’s growth prospects, citing resilient demand, better rural sentiment, and a strong order book across segments.