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Mahindra & Mahindra Q2 Preview| Standalone revenue may rise 58%

Net-profit growth estimates vary widely, dividend payout maybe a criteria too

November 11, 2022 / 08:12 AM IST
(Image: Auto Mahindra)

(Image: Auto Mahindra)

Mahindra and Mahindra’s standalone revenue is expected to rise substantially year-on-year (YoY) in the quarter ended September 2022. But the Street has widely varying estimates for the standalone net profit growth over the same period last year.

While its standalone revenue has been forecast to rise between 55 percent and 58 percent on-year to Rs 20,650 crore to Rs 21,016 crore, its standalone net profit may increase 2.5-3.8 percent to touch Rs 1,728.7 crore to Rs 2,323 crore. Ebitda margin is expected to be around 11-12 percent.

Also read: Tractor sales outpace forecasts, touch record highs in October

The auto and farm equipment business posted Rs 13,305 crore in standalone revenue and Rs 1,686 crore in standalone net profit for the second quarter this fiscal.

Quarter-on-quarter, the standalone revenue is expected to rise 5.3 percent to 7.2 percent, and standalone net profit is may increase 17.5 percent to 58 percent.

The auto and farm equipment business posted Rs 19,612 crore in revenue and Rs 1,471 crore in standalone net profit in the first quarter of FY23.

According to analysts of Elara Capital, who have given conservative estimates for the net profit growth, raw-material inflation will continue to weigh on the bottomline. “While key input cost has pared sequentially in H1FY23, companies are yet to entirely recover the surge in cost from FY21 levels, which has compelled OEMs to compensate for RM cost inflation to ancillaries, with a quarter’s lag. Expect RM cost to decline going ahead in H2FY23, which will reflect in margins,” they said in their Q2 preview report. They added that their top picks include Mahindra and Mahindra.

At IIFL, analysts have given an aggressive estimate for net profit growth of 38 percent QoQ and 58 percent YoY, and have cited fall in commodities (to a small extent), price hikes and operating leverage as margin tailwinds. Among margin headwinds, adverse revenue mix and introductory pricing of Scorpio N were listed.

Also read: Carmakers rev up production as chip shortage subsidies

While Kotak Institutional Equities believe that margins will continue to be weighed down by raw-material price inflation and adverse product mix, the brokerage still expects net profit to go up by 33 percent on-quarter and 20 percent on-year “mainly on account of higher other income due to Rs 30 per share dividend payout by Tech Mahindra during the quarter”, the analysts wrote in their Q2 preview report.

The estimated Ebitda margin to be 11.3 percent for this quarter, or a decline of 60bps on-quarter because of inferior segmental mix with the volume share of tractors falling from 43.6 percent in Q1FY23 to 34.2 percent in Q2FY23, and because of the lagged impact of raw-material price rise.

Asha Menon
first published: Nov 11, 2022 08:12 am

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