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Automotive business drives topline growth

Mahindra & Mahindra Ltd (M&M) manufactures automobiles, farm equipment, automotive components and agricultural tractors, implements and engines.

* In Q2FY25, consolidated revenue from operations rose 10.1% YoY to Rs. 37,924cr, driven by growth in the automotive and financial services segments.

* The automotive segment’s revenue increased 15.3% YoY to Rs. 21,755cr, as total auto volume, including exports, grew 8.9% YoY to 231,038, aided by higher passenger vehicle sales. The company reported highest-ever quarterly passenger vehicle volume of 135,962, up 18.5% YoY.

* Financial services revenue rose to Rs. 4,429 (vs Rs. 3,799cr in Q2FY24). Financial services AUM rose 20% YoY and asset quality improved. On the other hand, the farm equipment segment’s revenue declined 2.1% YoY to Rs. 8,194cr due to challenges in the international business.

* EBITDA increased 24.5% YoY to Rs. 7,133cr, driven by higher topline, and growth in total cost of sales was lower than revenue growth. As a result, EBITDA margin improved 220bps YoY to 18.8%.

* The company’s reported PAT increased 35.3% YoY to Rs. 3,361cr. PAT growth was partly offset by higher total tax expense.

Outlook & Valuation

The company continued to report healthy revenue on account of higher volume in the automotive segment and growth in the market share. The farm equipment segment is expected to perform well in H2FY25 due to surplus rain, hike in MPS of key rabi crops, and spending of the Government of India on rural development. Moreover, strong bookings for new launches, capacity expansion, and ongoing cost -efficiency initiatives for margin expansion are expected to drive its long-term performance. Therefore, we maintain our BUY rating on the stock with a revised target price of Rs. 3,382 based on 27x FY26E adjusted EPS.

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SEBI Registration Number: INH200000345