Sunday, May 28, 2023

Strong Demand For XUV 700, Scorpio-N Boosts Profit For M&M In Q2, Brokers Raise Target Price  

Strong Demand For XUV 700, Scorpio-N Boosts Profit For M&M In Q2, Brokers Raise Target Price  

Mahindra and Mahindra's profit after tax increased 46 per cent in September quarter, as against the same period last year

Mahindra & Mahindra last week reported 44 per cent increase in consolidated profit at Rs 2,773 crore for September quarter, boosted by robust sales of its newly launched sports utility vehicles XUV 700, Scorpio N and Thar. The group had logged a net profit of Rs 1,929 crore in July-September last fiscal year, Mahindra & Mahindra (M&M) said in a regulatory filing.

Revenue from operations during the quarter under review rose to Rs 29,870 crore from Rs 21,470 crore in the year-ago period, it added. On a standalone basis, the company reported revenue of Rs 20,839 crore in the second quarter, up 57 per cent from Rs 13,314 crore in the same period a year ago.

Profit after tax increased 46 per cent to Rs 2,090 crore in September quarter, as compared to the year-ago period.

The auto major said it sold a total of 1,74,098 vehicles in the second quarter, higher 75 per cent from 99,334 units in September quarter 2021-22. Tractor sales increased 5 per cent to 92,590 units in September quarter 2022-23 as compared to 88,027 units in the year-ago period.  

M&M Managing Director & CEO Anish Shah said the group's robust financial results reflect the progress it has made in its strategic imperatives. "While the auto segment has led growth, we have seen steady performance across our group companies. Our journey of creating value and providing growth capital continued," he added.  

Elaborating further, M&M Executive Director Rajesh Jejurikar said," It has been an action-packed quarter with multiple product launches and new products across segments, in addition to partnership announcements with BII and Volkswagen." 

The past quarter also marked the company's highest recorded quarterly revenue for auto and farm segments, he added.

 "In SUVs, we continue to be the revenue market share leader. Festive sales have been strong this year across auto and farm sectors. With the unveil of the XUV4OO and our Born Electric Vision, we enter the Electric SUV segment and aim to establish leadership position in the future," Jejurikar stated.

Brokers Remain Bullish

The second quarter revenue was in-line with estimates compiled by Mumbai-based brokerage firm Emkay.  

"Second quarter revenue grew by 57 per cent year-on-year (Y-o-Y) to Rs 20,840 crore, broadly in line with our estimates. Its operating profit also known as earnings before interest, tax, depreciation and amortization (EBITDA) grew 50 per cent to Rs 2,500 crore, matching our estimates," Emkay said in a note. 
“Management expects margins to improve ahead, on favorable commodity prices and price increases. The passenger vehicle (PV) order book is strong at 260,000 units, driven by robust demand for the Scorpio-N, XUV 700, and Thar models. EVs remain a focus area, with deliveries of Electric XUV400 expected in Q4FY23. Management expects to launch 6 electric models for PVs by CY27,” the brokerage firm added.

Emkay maintains buy call on the stock for target price of Rs 1,530 per share.

"The momentum in SUV retail sales continues, with the highest ever monthly bookings at 53,000 units in September 2022. Its average monthly booking rate in second quarter was strong across models (48,000 units versus a production of 35,000 units in September 2022)," Motilal Oswal said.

It was added, “Mahindra & Mahindra’s second quarter earnings were in line, with a stable margin, despite a weaker mix. While the Auto business is firmly on the growth path, led by a refreshed product portfolio, its tractor outlook is muted for second half of current fiscal. A strong order backlog in SUVs will continue to boost its performance, supported by capacity expansion and raw material cost savings.”

Motilal Oswal also has a buy call on the stock for target price of Rs 1,470. 

(With PTI inputs)