Mahindra & Mahindra’s Q2-FY24 operating performance was lower as EBITDA came in at ₹3,070 crore (vs est. ₹3,200 crore). Adjusted PAT surpassed expectations at ₹3,450 crore (vs est. ₹2,800 crore), primarily driven by better-than-expected other income, attributable to higher dividends. Revenue growth during the quarter was driven by volumes growth of about 11 per cent y-o-y, while ASPs grew 5 per cent y-oy to ₹804.6k/unit (est. ₹823.8k/unit).
We believe H2-FY24 will be a relatively better period vis-à-vis H1, led by growth in tractor volumes and execution of SUV orders. While the outlook for tractors remains stable, we expect the Auto business to be the key growth driver for the next couple of years.
We raised our FY24E/FY25 EPS by 5/2 per cent to account for higher ‘other income’ and lower tax despite a cut in EBITDA.
While the valuation is still attractive vs. peers, M&M has seen a substantial rerating in FY23 as the stock is now trading in line with its five-year average core P/E (against discount of 30 per cent earlier), driven by a strong performance in the SUV segment, market share gain in tractors, and a new launch pipeline in EVs.