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MSIL reported ~9% YoY/5% QoQ lower EBITDA on Kharkhoda plant costs, higher advertising, and lumpy other expenses; margins declined by 113bps QoQ to 10.5%, with underlying margins adjusted for lumpy expenses at ~11.4% (~5% miss vs Consensus). MSIL highlighted that the industry outlook remains tepid (as seen in Q3; 1-2% growth expected) but that it would outperform, driven by launch of electric SUV E-Vitara (~70k production in FY26) and another SUV this year; MSIL also targets 20% exports growth. Against the backdrop of muted demand and thinning industry launch pipeline, we like MSIL’s new launch visibility; further, valuations at near 1SD below LTA provide comfort (refer to Upgrade to BUY; higher ICE visibility, favorable risk reward). We maintain BUY with unchanged TP of Rs13,500 at 25x core Mar-27E EPS + ~Rs2,750 cash/sh.

Higher operating costs impact profitability QoQ

Q4FY25 revenue was 6% higher YoY at Rs406.7bn, with ASPs down 1% QoQ to Rs672.7k. EBITDA de-grew by 9% YoY to Rs42.6bn (~13% below Consensus’), with EBITDA margin down by 113bps QoQ to 10.5%. Q4 EBIT margin (down by ~120bps on sequential basis) saw drag from lumpy other expenses (like CSR, repairs; of 90bps), adverse mix (40bps), costs related to Kharkhoda Phase 1 (30bps), higher advertising spends (30bps), and commodities (~20bps), partially offset by lower discounts and operating leverage (40bps each). PAT fell 4% YoY to Rs37.1bn. MSIL declared Rs135/sh dividend for FY25.

KTAs from Q4 earnings call

1) FY26 industry growth forecast is tepid at ~1-2%; MSIL expects fare better than the industry aided by 2 new launches (already unveiled EV E-Vitara and another upcoming SUV). 2) Rural has continued to see better demand than urban; ~88% of Indian households are not currently participating in the entry car segment growth due to continued challenges around affordability. 3) Sales of E-Vitara would commence from H1, with full year production seen at ~70k units, largely comprising exports. 4) MSIL is hopeful of clocking at least 20% exports growth in FY26. 5) Channel inventory as of Mar25 stood at 28 days. 6) Penetration of hybrids is rising amid good customer response; more states are now showing interest; hopes to see continued push for Hybrid technology from all stakeholders. 7) Implementation of the 8 th Pay Commission could potentially be beneficial for segments like compact cars in the future, if undertaken to a similar extent as in the past, albeit contingent on quantum and scale of the payout. 8) Recent safeguard duty in steel does not affect MSIL, though it remains watchful on commodities; commencement of production at Kharkhoda followed by subsequent ramp up would help normalize the margin impact going ahead; EVs would have an impact on margins, though possibly lower in case of exports. 9) FY26 capex outlook: Rs80-90bn. 10) Retails in Q4 stood at over 400k units; export revenue stood at Rs55bn, with royalty rate placed at 3.8%. 12) The CAFE 3 policy details may be released in a couple of months.

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