M&M Q1 Preview: Auto segment in the driving seat, net profit seen rising 27%

Nomura has said that the farmer equipment segment or FES revenues are expected to increase 3 percent yearly

Automobile major Mahindra and Mahindra’s (M&M) net profit for the April-June quarter of FY24 is expected to rise 27 percent year-on-year (YoY) on the back of robust growth in vehicle sales during the said quarter.

M&M, which will report quarterly results on August 4, is expected to report a net profit of Rs 1,865 crore in Q1 as compared with the Rs 1,471 crore profit reported in the year-ago period.

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The company's revenue from operations is poised to increase 20 percent in the June quarter to Rs 23,473 crore, as per the average estimates of six brokerage firms. M&M's revenue for the same period in FY23 stood at Rs 19,613 crore.

Brokerage firm BNP Paribas' auto preview suggests that the company's revenue will largely be aided by the auto arm of M&M. Analysts at the broking company are of the view that the auto segment's revenue is likely to increase by 20 percent for the quarter under review. This is driven by an increase in volumes and ASPs due to price increases taken by the company and a richer product mix.

Nomura has said that the farmer equipment segment (FES) revenues are expected to increase 3 percent YoY on a 6 percent YoY increase in ASPs, partially offset by a decline in volumes.

The company's earnings before interest, tax, depreciation and amortization or EBITDA margin are also expected to improve by about 120 basis points due to softening raw material costs.

On the electric vehicle front, M&M informed the stock exchanges on August 3 that Temasek Holdings Pvt Limited, Singapore's sovereign wealth fund, will be investing up to Rs 1,200 crore in its EV business at a valuation of up to Rs 80,580 crore.

Post the investment, Temasek will have a stake in the range of 1.49-2.97 percent in MEAL (Mahindra Electric Automobile Limited), M&M's EV business, on a fully diluted basis, according to the regulatory filing.

Temasek Holdings is a global investment company with a net portfolio value of $287 billion as of March 31.

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