M&M Q3 Results Review – Inline Quarter; Waiting Period Coming Down: Systematix

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Mahindra and Mahindra Ltd.’s Q3 FY23 operating performance was in line with consensus and our estimates on the back of continued strong growth in auto as well as farm segment. Auto Ebit margin came in at 6.7% (up 320 basis points YoY) and tractor Ebit margin came in at 16.6% (down 80 bps YoY).

New launches in the sports utility vehicle segment have been received well, and the order book of ~266,000 units is well diversified across XUV 700, Scorpio N, Thar and the recently launched electric XUV300/400 (XUV400 received 15,000 bookings in three days of commencement).

The management has also highlighted that with deliveries improving, waiting period was lowered by ~1.5 months during the quarter.

M&M’s utility vehicle capacity expansion announced last quarter (increase in capacity by ~50%) over the next 18 months remains on track.

In farm segment, the company expects 10% growth in FY23E on normal monsoon and high government spending. Benefits from cooling off in the commodity costs have benefitted Q3 margins and the management does not expect further tailwinds ahead.

We upgrade our FY23E/24E estimates by 14%/ 9% to factor in increased guidance for tractor volumes, capacity expansion for UVs and higher non-operating income.

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