Shares of auto firm Mahindra & Mahindra have reduced the tendency to emerge as the top index gainer after reporting their Q2 numbers on Tuesday. It reported year-on-year growth of 785 % in net profit of Rs 1,431.7 crore, a 14.7% growth in revenue to Rs 13,305.4 crore.
The company's revenue was up 15% year-over-year in the second quarter of the fiscal year, driven by a nearly 25% increase in automotive revenue. As a result of commodity price pressures, gross margin declined 634 bps year-on-year, while EBITDA margin declined 528 bps year-on-year. Brokerage firm Prabhudas Lilladher in its note, said the company posted 'a good operating performance amid a challenging raw material scenario'. Mahindra & Mahindra's results were in line with the brokerage's consensus estimates.
ICICI Securities, Prabhudas Lilladher & Dolat Capital all have a 'buy call on the stock with target prices at Rs 1,141, Rs 1,061 and Rs 1037 per share, respectively. Analysts maintain a positive trend on the company, citing a strong order book, its plans in the EV space and its cost reduction exercise.
The company has booked about 1.6 lakh units, and the company's management expects those to continue, but supply chain constraints have restricted production and the company's management. Order bookings for approximately 70,000 units have been received for M&M's XUV700, which was recently launched. ICICI Securities looks forward to H2 FY22 to see a pickup in passenger tractors as supply-chain issues moderate while order backlog remains healthy.
For its farm equipment business, tractors are expected to witness flat-to-lower single-digit growth in FY22 due to higher channel inventory, a higher base and rising prices. The rapid growth in the agricultural machinery segment is expected to be driven by the equipment and another agri-related product portfolio.
The Mahindra & Mahindra tractor segment witnessed a market share of 190 bps to 40.1% despite inflationary commodity pressures and an 8% hike in prices, the company said in its conference call. The Mahindra tractor company is the most popular tractor manufacturer. They manufacture the best agriculture tractors and equipment in India.
In addition, for electronic control units (ECUs), management indicated that supply-side issues on semiconductors caused a loss of about 32,000 units in the second quarter.
On the EV front, Mahindra & Mahindra says it is looking for partners to expand its business across SUVs & LCVs, 3-wheelers. Over the next 5 years, the auto firm plans to launch multiple EVs, starting with 2 new models in FY23 ( E-XUV and 300 E-KUV). At the time the stock was up over 3% and was the top gainer on Nifty 50, trading with a 0.4% cut.
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