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M&M logged a strong Q4, with revenue up 26% YoY led by 25%/32% YoY growth in Auto/Farm revenue. EBITDAM was flat QoQ, at 13.9%, as GM contraction was offset by lower staff costs. Auto EBITM was flat QoQ, at 9.5% (+30bps YoY). Farm EBITM fell 80bps QoQ to 18.4% (flat YoY). M&M aspires for 15-18% SUV volume growth in FY27, aided by de-bottlenecking initiatives, strong demand across models, and select product actions (no new nameplates in FY27). It does not expect a major impact from fuel prices, as bulk of its customers are less conscious about fuel prices/fuel economy. M&M sees further headroom for price hikes (due to near-term RM pressure) as it has only taken a 2.6% hike so far vs the 8-10% price drop seen in PVs post GST cuts. On tractors, while M&M guides for 5% FY27 industry growth, visibility is limited due to higher base and bigger probability of rainfall deficit in H2. It expects demand to hold up in H1, contingent upon adequate rainfall; reservoir levels currently healthy. Per M&M, OEMs have maintained disciplined inventory over past 2–3Y (low dealer stock levels), so even if retail demand stays flat, there would be no need for destocking. We raise FY27E/28E EPS by 3-4%, factoring in higher SUV volumes; retain ADD and SoTP-based TP of Rs3,800 (25x FY28E core PER).

Strong operational performance, with beat across parameters

Revenue grew by 26% YoY to Rs396bn, led by 24% YoY volume growth and 9% QoQ higher ASPs. EBITDA grew 37% YoY to Rs55.1bn, with EBITDAM flattish QoQ at 13.9% as GM contraction was offset by lower staff costs. Auto/Farm revenue was up 25%/32% YoY. Auto EBITM was flat QoQ, at 9.5%; Farm EBITM fell by 80bps QoQ to 18.4%. Adj PAT was up 53% YoY, beating estimate on higher-than-expected other income/lower tax.

Earnings call KTAs

1) Auto:

i) Per M&M, capacity was a greater constraint than demand; it aspires for 15- 18% SUV volume growth in FY27, aided by de-bottlenecking initiatives, strong demand for models like XUV7XO, Bolero, Bolero Neo, XUV3XO (capacity currently maxed out here), and Thar, and select product actions (no new nameplates in FY27).

ii) Majority of M&M’s customer profile is less conscious about fuel prices and fuel economy; hence, it does not anticipate a major impact on demand from the potential rise in fuel prices.

iii) GST cut led to a 10%/8% cut in prices of sub-4mtr and >4mtr PVs. Against this, M&M has only taken a ~2.6% price hike and sees further headroom for price hikes given that RM pressure is seen sustaining in the near term.

iv) ICE SUV capacity of 56.5k/month to scale to 60k by H1 FY27-end; total SUV capacity to scale from 64.5k/month to 68k/month by H1FY27-end and 82k/month by FY28-start.

v) Nagpur plant on track for mid-CY28 commissioning; 10 ICE PV and 6 BEV launches are planned by FY31, with some models leveraging the NU_IQ platform across ICE/EV powertrains.

vi) Memory chips are a challenge, with no near-term resolution in sight; M&M is actively procuring chips in the aftermarket to build inventory, even at elevated prices.

vii) XEV 9E was already PLIcompliant; 9S and all BE6 variants are now PLI-compliant too; certifications for some models were pending in Q4 but have been secured now.

2) Farm:

i) OEMs have maintained disciplined inventory levels over past 2–3Y, keeping dealer stock levels low; so even if retail demand stays flat, there is no need for destocking.

ii) H2FY27 warrants caution as any rainfall deficit is more likely to materialize in the latter half of FY27; if monsoons are favorable in H1, demand should hold up well.

iii) If the scenario of no rainfall deficit plays out, H2 concerns would be limited to just the base effect.

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