Mahindra & Mahindra – Auto player miles ahead of the competition

Mahindra & Mahindra (M&M) is the flagship Company of the Mahindra Group. Its product range includes SUVs, pickups, commercial vehicles, tractors, electric vehicles, two-wheelers, gen-sets, and construction equipment. Over the last few years, it has gained leadership in the tractor segment and large SUVs in India.

M&M released their Q3FY23 results on 10th Feb 23. The results were a continuation of the YoY growth that the company has witnessed in the past few quarters, with the stupendous response it has received to some new launches including the Scorpio-N and its foray into electric mobility with the XUV400.

Highlights of Q3FY23 Results

• M&M’s Standalone Revenue stood at Rs 21,654 crores up 37% YoY.
• Automobiles and Tractors achieve highest ever Q3 volumes 
• M&M continues to remain in the top spot in SUV Revenue Market Share (20.6%) in Q3F23. Open bookings of SUV at 266k+ as on 1st Feb’23. 
• Farm Equipment saw Q3FY23 Market share at 41.0%, a gain of 160 bps vs Q2FY22 
• Launched XUV400 on 26 Jan and became the fastest booked Electric SUV in India with 15k+booking within 13 days of launch

Commenting on Q3 FY23 performance, Dr. Anish Shah, Managing Director & CEO, M&M Ltd, said, “We have had another robust quarter led by the robust performance of our Auto division. Our farm division also reported healthy growth with increased market share. Our capital allocation actions are continuing to show results and we remain committed to our journey of growth and returns.”

Maintaining leadership in different vehicle categories

Since the launch of its latest line of SUVs including the Thar, XUV700, and Scorpio-N over the last two years, M&M remains the market leader in SUVs for the last four consecutive quarters with the highest market share in the SUV segment.

In the light commercial vehicle (LCV) with a load capacity of 2-3.5 tonnes, M&M’s enjoys leadership with a 60.1% market share in Q3FY23.

M&M has a presence in the electric 3-wheeler space, where they make vehicles that are employed in last-mile delivery. This quarter, it achieved highest ever-quarterly billing of 11,801 units.

Similarly, M&M is the market leader in tractors with a 41.4% market share gaining 0.9% in Q3FY23. It sold 104,850 tractors in Q3FY23, the highest ever in Q3.

Mr. Rajesh Jejurikar, Executive Director, M&M Ltd, said, “Our efforts towards creating segment-leading products and improving operational efficiencies have led to the achievement of highest ever quarterly revenue and PBIT in Q3 F23 for Auto and Farm sectors. In SUVs, we continue to be leaders in revenue market share for the 4th consecutive quarter and have celebrated another successful launch of the XUV4OO. In the tractor business, we have achieved 41% market share, the highest Q3 market share in the last 5 years.”

Demand for SUVs remains strong

There have been challenges in the last year in the auto industry due to the shortages of semiconductor chips which affected the complete supply chain across the auto industry. The impact on M&M was that they received unprecedented orders on the XUV700 and bookings had a waiting period of more than a year before the delivery of vehicles. 

This is reflected in the data for open bookings, where Scorpio-N and XUV 700 have the highest open bookings. The average monthly booking for Scorpio-N is the highest among all vehicles.

Expansion plans to meet demand and expand EV products

M&M signed a Memorandum of Understanding (MoU) with the Government of Telangana for its proposed expansion plans at its existing manufacturing facility at Zaheerabad in the Medak district. The proposed expansion would mainly be towards setting up manufacturing facilities including the development and production of electric three- and four-wheelers pertaining to last mile mobility business at the current plant situated at Zaheerabad.

The estimated investment for this proposed expansion is expected to be approximately Rs1,000 crore to be made over a period of eight years by the company or any of its group companies.

What do the charts say?

M&M has been one of the best performing auto sector stocks over the last year. The stock price has gained nearly 60% in the last one year. Other auto makers, Maruti Suzuki aand Tata Motors have delivered 1% and -14% returns in the last one year. 

Evaluating the chart, the stock rose sharply from its lowest point in March 2022 at 700 to reach a high of 1300 in July 2022. The stock was consolidating for the past six months and has given a breakout above the level of 1300 last week. It is likely to begin a fresh up trend from here and there is a potential for the stock to touch levels of 1800 over the next twelve months.

To sum up, M&M has demonstrated leadership across vehicle categories including SUVs, LCVs, and 3-wheeler EVs. Its foray into the electric passenger vehicle space with XUV 400 is going to challenge the Nexon EV from Tata Motors, which is the segment leader without any major competition till now.

M&M is a good bet for investors with a long-term horizon looking for a suitable opportunity in the auto industry. It is a play not only on leadership in SUVs but also about the leadership in tractors LCVs and 3W EVs and enhancing market share in passenger EV space.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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