M&M Net Profit Rises 18% In Q4 On Robust SUV, Tractor Sales

Profit in the three months ended March stood at ₹2,637 crore. Revenue grew 25% to ₹32,366 crore from the year earlier quarter. The company declared a dividend of 16.25 per share of face value of ₹5, a 325% payout.

Net profit for the full fiscal year ended March of ₹ 10,282 crore was a record for the Mumbai-based automaker, driven by successful launches in automotive business, steady growth in farm equipment, strong operating performance at financial services and value unlocking through monetization and partnerships, according to the company.

M&M clocked its highest-ever automobile sales of 698,000 vehicles in FY23, an increase of 50%, and record tractor sales of 404,000 units during the year.

Anish Shah, managing director and chief executive officer, said the company has increased its capital expenditure outlay by 5.5% to ₹15,900 crore for FY22-24 due to the robust growth in automobile and tractor sales.

Asked whether an anticipated El Nino in the second half of the monsoon season could dampen rural demand for tractors, Shah said the weather phenomenon isn’t a major headwind as a 50-year analyses showed that average tractor industry growth in El Nino-affected years is 8%.

“Given the strong reservoir levels and bump up in rural spending ahead of the national elections, we expect low impact on tractor volumes, which will be in low single digits in the current fiscal year," he said.

On the impact of the scarcity of semiconductor chips, Rajesh Jejurikar, executive director and CEO (auto and farm sector), M&M, tagged the production loss at around 12,000 in the March quarter.

“A vehicle normally has more than 200 chips, which come from multiple sources. We expect the industrywide shortage to last for four to six quarters more. We have to be very watchful," he said.

Jejurikar said the FY24 would be one of reducing waiting period for electric vehicles such as XUV400, which currently has a waiting period of six months.

On a standalone basis, despite the high inflationary environment and stiffening Basel norms on emissions, M&M’s auto margins rose to 7.3% during the quarter, just 50 bps shy of the 7.8% posted in FY19, which attested to the robust performance of the company.

Brokerage JP Morgan which has a one-year price target of ₹1520 on the stock, an 18.6% upside from Friday’s closing level of ₹1,281.85, attributed its overweight rating to “continued strength in autos due to SUV launches and a strong order book; a volume recovery in tractors; and a stock re-rating due to improving ROE."

“ M&M is in the midst of a very strong model cycle in SUVs and should also benefit from a cyclical recovery in light CVs (already a leader), in our view. We believe better capital allocation and a turnaround in subsidiaries should continue to drive improvement in ROEs and a potential increase in cash return to shareholders. This should continue to drive a re-rating of the stock."

The stock has generated a 57% return over the past one year, making it the second-best performing after ITC.

Updated: 26 May 2023, 10:54 PM IST