M&M Q1 Preview: Net profit remains muted, revenue may rise 17% on auto, tractor recovery

M&M has been the best-performing stock on the Nifty, rising a massive 72 percent since the start of the year.

One of India's largest four-wheeler manufacturers Mahindra and Mahindra Limited is slated to release its earnings report for the first fiscal quarter of FY25 on July 31. An increase in volumes, robust performance from the auto segment and recovery in the tractor are expected to boost the company's sales to double-digit growth rates.

According to a Moneycontrol poll, the Thar maker is anticipated to record a 17 percent year-on-year increase in revenue, reaching Rs 28,166 crore. Net profit is projected to decline 2 percent to Rs 2,678 crore from Rs 2,737 crore in the same quarter of the previous fiscal year.

Earnings estimates from analysts polled by Moneycontrol are in a narrow range, indicating that any positive or negative surprises could trigger a sharp reaction in the stock price.

Tractor segment recovery: Revenue is likely to be driven by a 13 percent growth in the tractor segment, which includes a 6 percent increase in volumes, and a 15 percent rise in automotive segment revenues, fueled by a significant improvement in average selling prices (ASPs). "The expectation of an above-average monsoon is likely to drive tractor demand in 2HFY25," HDFC Securities said in a note.

Strong SUV sales: M&M is the second largest SUV player after Maruti. During the quarter, HDFC Securities said that the company has outperformed Tata Motors (3rd largest SUV player) for a fifth consecutive quarter. M&M posted 24 percent YoY growth in SUV sales, the brokerage added.

"We estimate overall EBITDA margin to improve by 80 basis points quarter-on-quarter led by richer segmental mix (tractor segment volume mix stood at 39 percent in 1QFY25 versus 27 percent in 4QFY24) partly offset raw material headwinds," Kotak Institutional Equities said in a note.

Analysts suggest that key factors to watch out for are raw material prices and advertising spending due to the launch of  XUV 3XO.

M&M has been the best-performing stock on the Nifty, rising a massive 72 percent since the start of the year.