M&M Q3 Preview: Margin expansion on the cards? Here’s what to expect

Auto major Mahindra & Mahindra (M&M) Ltd is expected to report robust earnings in the December quarter of fiscal 2022-23 (Q3FY23) on Friday, driven by strong growth in revenue and profit year-on-year (YoY) on good sales volumes and product mix.

On Thursday, shares of Mahindra And Mahindra Ltd closed 0.076% lower at rs 1,372.00 apiece on the NSE.

According to analysts, lower input costs, and higher realisations will push growth in double-digit in M&M’s operational performance.

M&M auto business’ topline is expected to improve only marginally quarter-on-quarter and its bottomline may dip over the same period, on a strong base, say brokerages.

Standalone revenue for the quarter under review is expected to rise 41% YoY to 21,474 crore, according to the analysts estimates.

Brokerages are also expecting the margins to improve by 60 basis points on-year led by volume growth and softening raw-material prices.

“Benefits from improved mix and weak input costs to help boost margins QoQ,” said Institutional Research Desk at HDFC Securities.

Here’s what other brokerages expect:

Prabhudas Lilladher: It expects 4% increase in revenue largely led by a 3% rise in volumes and change in product mix. EBITDA margins likely to improve led by easing raw material costs and higher share of SUVs in the mix. Growth in PAT is expected to be lesser YoY than that in EBITDA, considering lower other income and higher depreciation

Sharekhan by BNP Paribas:

– Revenue to grow by 2.5% q-o-q to 21,360 crore, aided by 3.2% increase in automotive revenues, partially offset by decline in tractor revenues.

– EBITDA margins to improve by 60 bps y-o-y at 12.6% driven by volume growth and softening raw material prices.

– Adjusted PAT is expected at Rs1,825 crore in Q3FY23E, reflecting growth of 34.9% y-o-y and a decline of 12.7% q-o-q.

Emkay Global Financial Services

Revenue is expected to grow strongly YoY due to 32% higher volumes, led by the automotive and farm equipment segments. Automotive segment is estimated to see 45% growth and farm equipment 14%. Realization is likely to improve by 6% on account of price hikes and better mix due to higher share of PVs at 32% vs 27% year ago.

EBITDA margin is likely to expand due to higher auto segment margin. Auto EBIT margin to expand due to higher scale, commodity deflation and price hikes. In contrast, the farm equipment segment’s EBIT margin may contract due to higher discounts.

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