IGI Logo

Product pipeline in SUVs and recovery in FES to drive the growth

M&M reported decent Q4 FY24 numbers wherein the topline was reported at ?254 bn, a growth of 12.7% yoy and flattish qoq. Volumes rose by 9.3% yoy and realizations went up by about 3.1% yoy. Automotive division revenues came in at ?199 bn, an increase of 20% yoy led by success of Thar, Bolero, XUV & Scorpio families with ~220K order book. Automotive segment reported strong EBIT margins, which rose by 170 bps yoy and 50 bps qoq to 8.8% on positive operating leverage, stable commodity basket and model mix. Tractor margins came at 15.8% which was 30 bps up qoq and lower 60 bps yoy as lower monsoons and unseasonal rains led to fall in volumes but margins improved qoq on lower RM basket costs. Overall EBITDA margins therefore came in higher at 14% (flattish qoq and 160 bps up yoy). Lower other income coupled with higher tax rate, led PAT to come in 4.3% up yoy at ?21.6 bn. On a sequential basis, the growth was 12% lower. Overall results were quite decent despite tractor business being on weak wicket.

SUV demand remains strong on robust demand for XUV 3XO

M&M witnessed 28% growth in the SUV segment volumes during the year. The company has received an excellent response for the new XUV 3XO with 50K bookings on the opening day. Scorpio N (incl. Classic) with 86K open bookings since its launch (~17 k per month) is another recent big success. The Thar and high cost XUV 7oo are still having huge order book of ~7K and ~8K each per month respectively, as their waiting periods are reducing now. Neo Bolero was launched in July 2021 which still has received strong order bookings (~9.5K monthly bookings for the entire Bolero family). With the smooth phasing out of XUV 3oo, the company has managed to bring in XUV 3XO at attractive price point. With this, the company was able to increase its SUV revenue market share at 20.4%, 130 bps up yoy and 40 bps up qoq. Competition is intensifying in the hot SUV segment with MSIL launching an array of launches, thus M&M conceding its #1 position to MSIL. M&M might turn once again market leader as the company plans to launch its EV and ICE variants (recent XUV 3XO and 5 door Thar) in CY24. From existing ICE capacity of 39K p.m by FY23 end, the company has ramped it upto 49K p.m by FY 24 end, which will be scaled up further to 64K and 72K by the end of FY25 and FY26 respectively. SUV as an industry is attracting bulk of the PV demand now (>50%) and since M&M is driving substantial part of it, we expect this segment to register 19%/15% growth in FY24E/FY25E/FY26E respectively. M&M plans to launch 9 ICE SUVs by 2030.

Out of the planned portfolio, there will be a strong presence of EV products (7 new products starting from CY 24 till 2030). M&M has planned to increase its capex up to ?270 bn (o/w ?140 bn will be for ICE SUVs, ?120 bn for EVs and ?10 bn for other subsidiaries) in the period between FY 25-27. M&M is looking for building partnerships with various EV players (Volkswagon) globally and build products such as XUV 7oo EV and XUV 62o EV. Also on the CV side, the company has launched the Bolero Max Pick-up 2T soon and has plans to launch several CVs and pick-ups over the next 5 years with a capacity expansion plan for each of the existing model in place. In the LCV business, M&M has gained about 350 bps yoy market share to reach market share of 49% in the <3T market. The recent launch of Supro Profit Truck has strengthened offering in 0-2T 4W segment. M&M launched Jeeto CNG and Maxx Pick up in the LCV segment resulting in strong market share growth. We expect 7%/8% volume growth in CVs in FY25E/26E. M&M has garnered 58.7% market share in the e-3W space with the success of E-Alfa, Jeeto, Treo Auto (recently launched Metal body) and Treo Zor launched few quarters ago. A variant of Treo-Zor, named as Zor Grand was launched in Q2, which is also gaining momentum. M&M sold 66K units of E-3Ws in FY 24 as compared to 43.6K units in FY 23. Despite increasing competition, we expect 23%/15% (on a high base) growth in 3Ws in FY25E/26E respectively.

Tractor segment may see revival with above normal expected monsoons in CY24

M&M witnessed about 29% qoq and a 20% yoy de-growth in tractor volumes in Q4 FY24, while in FY 24, they declined by 6%. M&M lost market share by 130 bps yoy in Q4 at 39.4% while in FY24 the company gained 40 bps at 41.6%. The fall in FES volumes has been led by El Nino and its impact on the southern states and Maharashtra, leading to a deficit of 94.4% in CY 2023, GoI’s reduced spending on Agricultural and Rural development, slow Rabi sowing are also some of the reasons for low tractor growth. However, success of newly launched Oja, Target and Naya Swaraj tractors in the 20HP and 30HP range led M&M to win market share of 12.8% quickly. In the farm machinery segment, M&M sees a robust demand with 15 new products launches in the Rice Cultivators, Rice and Vegetable Transplantors, Rotavators space. M&M is #2 in the Rotavator space with 20.3% market share (16.5% in FY23) leading to a growth of 32% in the farm Machinery segment in FY24. On high base of FY23, we saw base effect as well in FY24. Currently we expect domestic FES segment to grow at 7%/10% in FY25E/26E respectively as against 6% fall in FY24. We believe that due to election year, first half of the year may remain soft while on expectations of strong monsoons and weakening El Nino (as predicted by MET departments), we believe H2 FY25 to be stronger than H1.

For More  LKP Securities Ltd Disclaimer  http://www.lkpsec.com/

SEBI Registration number is INM000002483

Above views are of the author and not of the website kindly read disclaimer