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High sales volume across segments backed by better product mix drove the growth

Record quarterly revenue led by strong volumes: M&M reported strong set of number with revenue at Rs 21,654 Cr, a significant growth of 41.1% YoY. The growth in revenue was driven by high demand for its new launches in SUV category while tractor category too witnessed robust demand. Amongst segments, Auto division revenue was reported at Rs 14,797 Cr, up by 53.3% YoY while Farm Equipment revenue was at Rs 6,278 Cr, higher by 20.3% YoY.

Higher volumes led to consistent increase in realization: Strong demand across segment driven by new launches as well as better operating efficiency and higher priced product mix improved the volumes by 31.6% YoY to 2,81,747 Units and realization by 7.2% YoY to 7,68,553/Unit. Amongst segments, Auto division total volumes including exports were at 1,75,982 Units higher by 45.2% YoY while tractors volumes grew by 13.8% YoY to 1,05,765 Units.

Low input cost aided margin improvement: EBITDA for the quarter came in at Rs 2,814 Cr, up by 56.1% YoY led by commodity tailwinds as well as efforts towards improving efficiencies, reducing cost and higher volumes aided EBITDA margin improvement by 125bps at 13.0%.

Capacity expansion to cater strong demand: The current order book is at ~2,66,000 Units vs ~2,60,000 units in Q2FY23, with consistent rise in demand the company has taken measures to increase its capacity and will effectively double its capacity by FY24 which would result in better operating efficiency and reduced waiting period.

Key concall highlights:

1) Order cancellation of 10-12% due to longer waiting period.

2) Management highlighted chip shortage still has minor blips on the production.

3) The company stated it has sold highest number of E-3 Wheelers at 11,800 Units since its inception.

4) Received strong response for E-XUV 400 with ~15,000 bookings within 13 days of the launch.

5) Management stated that the revenue market share has improved to ~20.6% which expanded by ~400bps YoY.

6) The company will look to gradually scale its exports business due to huge opportunities.

Outlook & Valuations: M&M is one of the leading players in the SUV category with a revenue market share of ~20.6%. We expect M&M’s Auto division will drive the growth led by tremendous demand for its new launches while its foray in Electric Vehicles will also aid in topline growth gradually. It also has strong presence in the Farm Equipment space with a market share of ~41%, government’s focus on improving farm activities as well as demand uptick will aid in revenue growth. We maintain our positive view on the company and expect its Revenue/EBITDA/PAT to grow at a CAGR of 21%/24%/28.2% over FY22-25E. We recommend Buy rating with a revised target price upwards to Rs 1,556.

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