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In Q3FY24, M&M reported revenue growth of 16.8% YoY basis to Rs.252bn (vs CEBPL est. of Rs.254bn) which is largely in line with our estimates. Automotive business grew by 25% YoY to Rs.185.7bn and FES segment grew by 7.3% YoY growth to Rs.67.35bn. Margin during the quarter came at 12.8% (excluding investments from JV& Subsidiary) (-20bps YoY/+73bps QoQ) led by RM cost benefits. EBITDA grew by (15% YoY/103% QoQ) to Rs.32.36bn and APAT for the quarter jumped by 23% YoY to Rs.23.2bn. Order book in the Automotive segment is down slightly to 226k units, Management expects SUV volume to slightly come down due to ramping down XUV300 for mid-cycle enhancement, however it will not impact the order booking. On the FES side, Management expects on a full year basis tractor segment revenue to be down by 3-4%.

* The Automotive segment witnessed a healthy margin expansion, with the EBIT margin increased by 156bps YoY to 8.3%. Farm Equipment segment’s EBIT margin came in at 15.5% contracted 109bps YoY/ 52bps QoQ, contraction in margin is largely due to change in mix and launch related to world cup advertisement. The AUTO/FES EBIT mix stood at 60:40 in Q3FY24 compared to 49:51 in Q3FY23.

* Order book for XUV300 & 400-8.8K, XUV700-35k, THAR-71K, Bolero & neo-10K, ScorpioN-10K and cancellation rate is around 10%. The company is investing in product development, with a focus on the SUV segment and has a wide and strong product portfolio, with many new products in the pipeline. Management is focusing on capitalizing on its market leadership of the Auto and Farm sectors, unlocking potential in MMFSL and TechMahindra, and focusing on growth gems with 5X growth over 7-8 years.

Outlook and Valuations: Company is on track to increase its production capacity to 49k, in line with increasing SUV demand which is expected to grow 10-11% in FY25. We expect the Automotive segment to register healthy growth in coming years. Additionally, in the tractor segment, a series of launches are underway in various categories, which will support the growth of the Farm Equipment segment. Further, launches in the Farm machinery segment (high margin) are also expected to do well going forward. We expect Standalone revenue/EBIDTA to grow at 15/22% CAGR over FY23-26. Additionally, management’s capital allocation to remain on core business and will further create shareholders in coming years. We maintain an ADD rating on the stock with a SOTP TP of Rs.1,821 (based on 17x Sep-25E Core EPS + subsidiary valuation )

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