Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahindra & Mahindra Ltd (MAHMF, Financial) reported a strong operating performance in both the Auto and Farm sectors, with Auto revenue market share increasing to 21.9%, up nearly 2 percentage points from the previous year.
- The company achieved significant margin improvements, with PBIT margins in the Auto sector up by 140 basis points and Farm sector margins up by 150 basis points compared to the same quarter last year.
- Mahindra Finance showed a positive turnaround with asset quality improving, as gross stage 3 (GS3) assets were reduced to 3.8%, and profit after tax increased by 36%.
- The renewables business, Susten, is progressing faster than planned, securing almost 1 gigawatt in the last quarter alone, indicating strong growth potential.
- The company maintained a robust consolidated profit after tax growth of 35% year-over-year, with a return on equity (ROE) of 18.9% for the quarter, surpassing their target of 18%.
Negative Points
- Mahindra & Mahindra Ltd (MAHMF) faced challenges in its international Farm business, particularly in North America, where the market has significantly shrunk, and in Turkey, where hyperinflation affected accounting numbers.
- The company experienced a 1% decline in disbursements in Mahindra Finance, although this was not a major concern as the focus was on building a stable business model.
- There were some pressures on logistics profitability due to the integration of Rivigo, despite revenue growth in the segment.
- The company anticipates temporary pressure on margins in the Auto sector due to launch expenses, particularly in Q3.
- Mahindra & Mahindra Ltd (MAHMF) is facing capacity constraints in some ICE models, necessitating a review of their manufacturing footprint to address the demand.
Q & A Highlights
Q: What are the current demand conditions for SUVs and how is Mahindra & Mahindra planning for ICE and electric vehicle capacity?
A: Rajesh Jejurikar, Executive Director and CEO of Auto and Farm Sector, stated that the festival season was strong for all OEMs, including Mahindra & Mahindra. The company expects to maintain momentum with new launches, aiming for 15% to 18% growth in the SUV portfolio. Currently, there are no additional capacity plans for ICE vehicles, but they are considering adjustments due to better-than-expected product performance. Electric vehicle capacity will add 100,000 units annually, with some cannibalization expected.
Q: How did the price cut on the XUV700 impact margins and sales?
A: Rajesh Jejurikar explained that the price cut was supported by reduced commodity costs and market-driven pricing of chips. The decision aimed to make the brand more accessible, particularly the top-end versions, which increased the mix and total volume. As a result, volumes rose from 6,000 to 8,500 units, with top versions back on a waiting list, and margins remained unaffected.
Q: What is the outlook for auto margins considering raw material pricing and the introduction of electric vehicles?
A: Rajesh Jejurikar noted that while there is some pressure from rubber prices, overall commodity costs are benign. Electric vehicles, being a separate subsidiary, will initially have lower percentage margins due to the denominator effect, but unit margins are expected to align with ICE vehicles over time. Marketing costs for EVs will impact Q3, but this is a temporary phase.
Q: Are there any plans for Mahindra & Mahindra to acquire a stake in Volkswagen India?
A: Anish Shah, CEO and Managing Director, stated that the company is open to opportunities that make strategic and financial sense. They are in discussions with various partners and will consider opportunities that align with their long-term goals and provide mutual benefits.
Q: Which unlisted subsidiaries are most advanced in terms of scale and profitability, and which might go public first?
A: Anish Shah highlighted that all growth gems are performing well, with significant progress in renewables, aerospace, and last-mile mobility. While there is no immediate need for capital, the company is focused on building strong businesses for the long term and will consider going public if it aligns with their strategic goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
