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M&M posts healthy operational performance in Q3FY22
What’s Buzzing:
Amid higher-than-expected gross margin decline for the quarter (200 bps QoQ), Mahindra & Mahindra (M&M) reported a healthy performance in Q3FY22. EBITDA margins for the quarter came in at 11.9%, down 60 bps QoQ. This was primarily tracking substantial savings realised in other expenses, which for the quarter were down 120 bps. The management shared healthy demand outlook for the company’s product basket with current order-backlog at 155,000+ units including ~70,000+ units of the recent launch i.e. XUV700.
Context:
In Q3FY22, for M&M, standalone sales for the quarter were at Rs 15,239 crore, up 14.5% QoQ. Automotive sales volumes for the quarter were at ~1.21 lakh units, up 19.2% QoQ, with tractor volumes recording 4.6% QoQ increase to ~0.9 lakh units. EBITDA in Q3FY22 were at Rs 1,806 crore with consequent PAT at Rs 1,353 crore, down 5.5% QoQ. Higher PAT for the quarter was also supported by better than anticipated EBITDA margins, higher other income (dividend from subsidiaries and JVs) and lower effective tax rate (~18%).
Perspective:
Mahindra & Mahindra (M&M) is India’s largest tractor manufacturer (38.2% FY21 market share) and prominent player in the CV & PV domain. The CV space is undergoing a cyclical recovery while there is robust demand for M&M’s product basket in the PV domain, especially for successful new launches like XUV 700, Thar among others. Hence, the company is well poised for healthy profitable growth ahead. The company is also leading the EV transition domestically and is currently the industry leader in the E-3-W space with a presence in the electric-PV segment as well. It has guided for aggressive model launches in this domain, going forward. It is also walking the talk on revamped capital allocation strategy and is well poised for healthy double digit return ratios starting FY23E.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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