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Steady Q2; growth trends to moderate ahead

M&M delivered a strong Q2 operationally, with revenue up 22% YoY and the EBITDA margin improving to 15.1% (up ~41/110bps YoY/QoQ), led by a better mix and lower opex. The Auto segment’s EBIT margin rose by 25bps QoQ to 9.2% (though down by 35bps YoY), while that of the Farm segment came flattish QoQ at 19.7% (although up by 220bps YoY). The management remains constructive on GST cuts being a structural demand enabler across PVs/LCVs. The FY26 growth guidance for SUVs is unchanged (mid-high teens); the mgmt has upped its FY26 growth guidance for tractors to ~10-12% (~5-7% earlier), implying largely flattish volumes for the rest of FY26. We raise FY26E/27E/28E EPS by ~10%/14%/15%, respectively, to factor in benefit from GST-cut linked demand improvement. We reiterate ADD, with a revised SOTP-based TP of Rs3,650 (vs Rs3,200 earlier; a 14% upgrade), at 25x Sep-27E core EPS.

Operationally strong quarter

Standalone operating revenues grew 22% YoY to Rs336.8bn (Emkay estimate: Rs346bn). Volumes grew 14% YoY to 363k units, while realizations were higher by ~3.5% QoQ at Rs927.5k/unit (~3% below estimate). EBITDA grew by 5% YoY to Rs50.7bn, in line with Emkay estimate of Rs51.1bn. EBITDA margin rose by 110bps QoQ to 15.1% (Emkay estimate: 14.8%); the improvement was on the back of lower opex and 90bps QoQ GM expansion. Auto segment’s revenue rose by 18% YoY to Rs249.3bn, while the Farm segment’s revenue rose 31% YoY to Rs85.4bn. APAT grew by 18% YoY to Rs45.2bn (Emkay estimate: Rs44bn); the beat was due to better margins/higher other income.

Earnings call KTAs

1) The GST cut helped unlock latent demand for previous quarters, especially in LCVs and entry SUVs, with M&M optimistic about the move, calling it a multi-year structural demand booster across PVs, LCVs, and tractors. 2) Festive demand saw mid-high teen retail growth, with strong spillover post-Diwali (with bookings stronger vs retails), indicating sustainable pipeline visibility. The mgmt continued to maintain its FY26 growth guidance for Autos at mid-teen levels. 3) LCVs saw double-digit festive growth; the mgmt expects low double-digit growth (~10-12%) in tractors in FY26 (vs its ~5-7% guidance earlier), with broad-based demand aided by rural cash flow improvements (crop exports, government spends, etc). 4) Auto exports are growing well in South Africa and Australia; the 3XO/XUV 700 series are gaining traction. 5) For MEAL, the mgmt’s focus remains on product rollout and brand building, network reinforcement, and localization (especially for battery packs), to qualify for PLI. EBITDA remains healthy, although the company is willing to reinvest in growth rather than optimize margins prematurely. 6) The mgmt highlighted that NXPeria chip’s shortage had hit some European OEMs severely; however, the issue is under control for M&M and Q3 is fully covered. 7) 3 new ICE SUVs (incl 2 mid-cycle enhancements) are in the CY26 pipeline. 8) MEAL, meanwhile, continues to scale up with a disciplined approach (the new XEV 9S’ launch is in Nov-25).

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