MSIL’s Q2FY25 standalone revenue increased by a mere 0.4% YoY, mainly driven by ASP expansion of 2.6% YoY as volume declined by 1.9% for the quarter. Prices of key commodities increased by and promotional expenses increased, leading to a contraction in its gross margin by 130bps YoY. As a consequence, the EBITDA margin contracted by 100bps YoY to 11.9%. Withdrawal of indexation benefits on long term gains saw a rise in taxes impacting profitability with PAT declining by 17.4% YoY. The sluggishness in the small car segment and slowdown in the industry shall impact wholesale growth for FY25, however, could be partially offset by healthy growth in UVs and export market. Given the grim outlook for FY25, we cut our volume/revenue/EPS estimates by ~-2-8% over FY24-FY27E. We continue to maintain our positive view on a long-term basis due to its 1) Diverse range of product offerings, 2) Revival in rural demand, 3) Beneficiary of state policies towards hybrids and other flex fuel powertrains. 4) Healthy traction in export markets and 5) Introduction of EVs and new launches.
OutlookFactoring this, we retain our “BUY” rating with a TP of Rs 14,586 (previous Rs 15,045) valuing it at 25x on its Sept’27 earnings.
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