Automotive major Mahindra & Mahindra Ltd will declare its results for the quarter ended December 2021 during the day today.
The auto sector continues to face inflationary headwinds from higher commodity prices and the ensuing disruption in semi-conductor supplies.
The Mahindra group flagship, with interests in automobiles, banking and financial services, technology, realty and hospitality, is expected to report 30-40 percent on-year decline in its adjusted profit after tax due to raw material costs and lower volumes.
Experts see the revenues rising 9-10 percent YoY aided by 13 percent increase in net realisations and 4 percent decline in volumes.
To be sure, the company had reported standalone revenues of Rs 14,057 crore a year ago. The net profit last year stood at Rs 531 crore. The company had booked an impairment of assets to the tune of Rs 1,214 crore in the year ago quarter, adjusting for which the profit for the quarter was Rs 1,745 crore.
During the second quarter of this fiscal, the company had reported revenues of Rs 13,305 crore with a net profit of Rs 1,432 crore after adjusting for exceptions (impairment of assets) of Rs 255 crore, the adjusted PAT for the quarter stood at Rs 1,687 crore.
"We estimate a 9 percent YoY increase in revenues led by (1) 16 percent YoY increase in automotive revenues mainly led by higher ASPs (average selling price) on account of successful new launches and (2) 1 percent YoY decline in tractor segment revenues led by 8 percent YoY increase in ASPs, offset by 9 percent YoY decline in volumes during the quarter,” Kotak Institutional Equities said.
It pegs the revenues for the quarter at Rs 15,337 crore with a sequential growth of 15.3 percent.
EBITDA (earnings before interest, tax, depreciation and amortisation) is likely to decline 25 percent on-year but improve 8 percent on quarter to Rs 1,794 crore.
“We estimate overall EBITDA margin to decline by 80 bps QoQ led by (1) RM headwinds and (2) an inferior segmental mix (higher mix of automotive segment), partly offset by (1) improvement in automotive segment EBIT margin due to operating leverage benefits and a richer model mix and (2) cost-cutting initiatives in 3QFY22,” said the Kotak report.
EBITDA margins are expected to contract more than 500 bps on-year to 11.7 percent compared to 17 percent in the year ago quarter.
Kotak forecasts a PAT of Rs 1,011 crore which is a decline of 42 percent on year from the adjusted profit last year and a 40 percent decline from the adjusted profit in the previous quarter.
According to the report from Motilal Oswal, the sales volume for the quarter are expected to dip by 4.4 percent on year to 2.14 lakh units compared to 2.24 lakh units last year. Volumes in the second quarter of current year stood at 1.91 lakh units.
“SUVs and Pick-ups see good demand recovery, but were restricted by supply chain constraints while tractor demand was under pressure on high base of last year,” the brokerage said in its report.
It expects the net realisations to improve 13 percent year-on-year to Rs 7,04,631 from Rs 6,23,567 achieved in the same period last year. The net realizations in the previous quarter stood at Rs 6,98,078.
Revenues for the quarter are likely to increase by 8 percent on year to Rs 15,089 crore. On a sequential basis the revenues may inch higher by 13 percent.
Raw materials cost as a percentage of sales is likely to jump 500 points to 73.8 percent compared to 68.9 percent last year. This is higher by 100 bps compared to the previous quarter of current financial year.
The staff cost for the company is declining steadily on account of better efficiencies. The staff cost may be down 80 bps on year and 50 bps on quarter to 5.5 percent.
Consequently EBITDA margins may contract 440 bps on year to 12.2 percent and by 30 bps on quarter.
Motilal Oswal estimates a PAT of Rs 1,017 crore which is likely to decline by 40 percent from the adjust profit of last year.
The brokerage firm Axis Capital expects the revenues to improve by 9 percent year on year to Rs 15,300 crore while on a quarterly basis, the growth in revenues is likely at 15 percent.
“Auto ASP to be up 2.7 percent QoQ due to price hikes taken by the company and higher XUV7OO mix partially offset by higher LCV mix. Tractor ASP may improve by around 1 percent QoQ due to price hikes” added Axis in its report.
EBITDA margins at 13 percent may fall 400 bps on year nut improve by 50 bps compared to the previous quarter.
Sequential improvement in EBITDA margin is likely to be driven by “gross margin expansion of 50 bps on some normalisation of commodity costs, benefits of better mix in SUVs partially offset by weaker revenue mix of farm equipment segment (34 percent vs 37 percent QoQ)’, added Axis in its note.
It pegs the PAT at Rs 1,080 crore, declining by 38 percent on year from the adjusted profit of last year and lower by 36 percent from the adjusted profit in the previous quarter.
Mahindra & Mahindra closed at Rs 840.2, up Rs 8.15 from its previous close at the National Stock Exchange on February 09. The stock is down 6 percent in the past one year.
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