M&M's Q3 revenues may rise up to 42% YoY, fall in RM prices to aid margins

Auto major Mahindra and Mahindra (M&M) is likely to clock up to 42.5 per cent year-on-year (YoY) growth in revenues to Rs 21,712 crore in the October-December quarter (Q3FY23), brokerages estimate. In the year-ago period, the company reported revenues at Rs 15,238 crore. The tractor-to-SUV maker will announce results on Friday, February 10.

According to estimates, softening raw material prices, coupled with volume growth are likely to help Ebitda (earnings before interest, tax, depreciation, and amortisation) margins expand up to 60 basis points (bps) to 12.6 per cent in Q3FY23 from 11.9 per cent in Q3FY22. Adjusted profit-after-tax (PAT), meanwhile, is projected to grow up to 35 per cent YoY to Rs 1,825 crore in Q3FY23, while decline up to 27.1 per cent quarter-on-quarter (QoQ) from Rs 2,337 crore in Q2FY23.

On the bourses, shares of M&M declined 1.4 per cent in Q3FY23, whereas peers like Maruti Suzuki, and Tata Motors slipped up to 4 per cent. In comparison, the S&P BSE Auto index was down 0.8 per cent, and the Nifty50 index climbed 6 per cent, during the same period.

Here's what brokerages estimate ahead of M&M’s Q3FY23 results:

Motilal Oswal

The brokerage firm estimates strong volume recovery in both autos (improving supply chain) and tractors (healthy farm sentiments). Analysts peg 15.7 per cent YoY growth in volumes to 2.81 lakh units from 2.14 lakh units, in the year-ago period. On the other hand, a sequential improvement in Ebitda margins is likely in Q3FY23 to 12.7 per cent, up 70 bps from 12 per cent in Q2FY23, supported by better mix and operating leverage.

Sharekhan

Analysts expect revenues to grow 40.2 per cent YoY and 2.5 per cent QoQ to Rs 21,360 crore in Q3FY23, aided by 3.2 per cent increase in automotive revenues, and partially offset by decline in tractor revenues. Adjusted PAT, too, is expected to grow 35 per cent YoY to Rs 1,825 crore. Volume growth and correction in input prices, meanwhile, is likely to expand Ebitda margins 60 bps YoY to 12.6 per cent, during the quarter. 
 

Nirmal Bang Institutional Equities

While the brokerage firm models 45 per cent YoY growth in volume, driven by good response to new launches and robust CV segment volume, it is likely to contract marginally by 2 per cent QoQ, on the back of higher base. That said, analysts see positive farm sector sentiments contributing 14 per cent YoY and 13 per cent QoQ volume growth in the tractor segment.

Prabhudas Lilladher

Analysts forecast a 4 per cent QoQ increase in revenue to Rs 21,712 crore, led by 3 per cent rise in volumes and change in product mix. Fall in raw material prices, and higher share of sports utility vehicle (SUVs) are likely to improve Ebitda margins to 12.7 per cent YoY in Q3FY23 from 11.9 per cent, in the year-ago period. PAT growth in YoY terms, however, is likely to be lower than Ebitda growth, due to lower other income and higher depreciation, they said.