Auto & Auto Ancillaries
Result Update
May 06, 2025
ADD
CMP (Rs): 3,022
TP (Rs): 3,000
M&Ms Q4 results were operationally healthy, with margin expansion in Autos and Tractors on like-to-like basis QoQ (Auto margin up by ~30bps to 10%, Tractor margin up by ~130bps to 19.4%). M&M expects its outperformance vs the underlying PV industry to continue, with full-year benefit of recent launches (Thar Roxx, XUV 3X0) and limited cannibalization of recently introduced BEVs. It outlined plans for more new launches in CY26 (1 ICE SUV, 2 BEVs); tractor industry outlook for FY26 stands at a high single digit. We believe that while the announcement for a new ICE SUV is welcome, bulk of the growth in Autos ahead would be driven by BEVs (margin-decretive in the near-to-medium term), with FY25-27E EBIT CAGR at a modest ~7%. We raise FY26E/27E core EPS by ~6.5%/5% on higher volume/margin (in core Auto business, and lower margin drag from BEVs in SA, as this would be captured in EV subsidiary MEAL). We maintain ADD while revising up our SoTP-based TP by ~11% to Rs3,000 from Rs2,700, at 25x PER for the core business (risk-reward is balanced).
Q4: Healthy operational performance across Autos, Tractors
Revenue grew 24% YoY to Rs316bn (volume up 19% YoY, ASP up 11% QoQ), with EBITDA margin down by 116bps QoQ to 13.3% on higher other expenses despite gross margin being higher by ~80bps. Auto/Farm revenue rose 25%/23% YoY. Absolute Auto EBIT was higher by 6% QoQ; Auto EBIT margin stood at 9.2%, down by 44bps QoQ, though margin excluding manufacturing margin on Born EVs stood at 10%. Tractor EBIT margin stood at 19.4%, up by 134bps QoQ. Adjusted PAT grew 22% YoY to Rs24.4bn.
Earnings Call KTAs
i) M&M optimistic about outperforming the PV industry in FY26, aided by full-year ramp up of XUV 3X0 and Thar Roxx, and limited cannibalization by Born EVs on ICE SUVs (as well as by Thar Roxx on Thar), along with good exports momentum in markets like South Africa/Australia. ii) To introduce 1 new ICE SUV in CY26, along with 2 BEVs and 2 LCVs (incl 1 electric); launches by 2030, to include 5 new ICE SUVs, 5 BEVs, and 5 LCVs (incl 2 electric). iii) FY26 Auto capacity (units/mth) stands at 69k, incl 12k for BEVs (vs 61.5k in FY25); FY27 capacity stands at 85k, incl 18k for BEVs; separately, would create new capacity of 120k units pa at existing Chakan plant for upcoming platform (to be unveiled on 15-Aug); also planning new greenfield for FY28 and beyond. iv) Average waiting period for current BEV bookings is ~4 months; M&M has slowed deliveries in Apr-May, to ensure no slip ups in customer experience. v) Domestic tractor industry is seen growing in a high single digit in FY26. vi) On EV margin, evolution of pack mix is seen as the biggest driver from current levels (25-30% of mix could be from lower-priced Pack 1/Pack 2 variants going forward, as volumes rise) in addition to cell prices (indexed, with lag of a quarter) and volume growth; M&M is also undertaking cost actions to further improve profitability; no immediate price hike planned in BEVs; M&M would accrue PLI benefit for its 9E model on receiving technical certification (likely in Q2); thereafter, accrual would be on cumulative basis for sales from Day-1. vii) Expects some increase in competitive intensity in tractors ahead, and so would need to undertake protective actions.
