M&M Q4 preview: Profit may surge over 300%; margins may contract QoQ

Mahindra & Mahindra (M&M) is likely to report a healthy performance for the March quarter results of FY21 (Q4FY21), which are scheduled to be announced on Friday, analysts said. They expect the utility vehicles and farm equipment major to report up to 330 per cent year-on-year (YoY) growth in net profit, helped by increase in volume and average selling price (ASPs). However, operating margins are expected to decline amid rise in commodity prices.

According to the monthly sales update provided by the company, Mahindra & Mahindra sold a total of 202,223 units in Q4FY21, up 33.3 per cent from the 151,713 units sold in the year-ago quarter. However, the volumes fell 10 per cent on a sequential basis. M&M registered 58 per cent YoY increase in tractor volumes and 17 per cent YoY increase in auto sales.

Outlook for demand in tractors, timelines on the launch of XUV 500, and further update on the impact of exit from Ford JV/SsangYong stake sale would be the key monitorables, HDFC Securities said in a result preview note.

At the bourses, Mahindra & Mahindra rose 10.33 per cent in Q4FY21 as compared to 3.68 per cent gain in the benchmark S&P BSE Sensex, in the same period, ACE Equity data show.

Here's what leading brokerages expect from M&M's Q4FY21 numbers

Emkay

The brokerage expects a 44.4 per cent YoY increase in M&M's top-line at Rs 13,001.5 crore while net profit is seen growing 214 per cent to Rs 1,012.8 crore from Rs 323 crore reported in the year-ago quarter. Earnings before interest, tax, depreciation, and ammortisation (Ebitda), meanwhile, is pegged at Rs 1,839.2 crore, up 49.8 per cent on a YoY basis.

"Realizations are expected to improve due to price hikes and higher share of passenger vehicles. Ebitda margin is likely to contract on higher input costs and lower scale to 14.1 per cent, down 283 bps quarter-on-quarter (QoQ). Other income should fall  notably (64 per cent) due to lower dividends from subsidiaries," it said.

HDFC Securities

Analysts at HDFC Securities have pegged M&M's Q4FY21 top-line at Rs 12,460 crore, up 38 per cent on a YoY basis, although the same would be a decline of 11 per cent on a sequential basis. They also expect M&M to post a profit of Rs 1,390 crore in the quarter under review, up 330 per cent from the year-ago quarter. On the operational front, Ebitda margin is seen contracting 110 bps QoQ to 15.9 per cent.

Kotak Securities

The brokerage is penciling in a 43 per cent YoY increase in Q4 revenues at Rs 12,898 crore, led by 10 per cent YoY increase in ASPs, due to richer product mix and 33 per cent YoY increase in volumes. Meanwhile, PAT is seen at Rs 1,223.1 crore. "We estimate Ebitda to increase by 63 per cent YoY to Rs 2,000.7 crore led by richer product mix (higher mix of tractor segment) and cost reduction efforts partly offset by increase in input cost in the quarter under review. Margin is seen at 15.5 per cent as compared to 17 per cent in Q3FY21," it said.

ICICI Securities

ICICI Securities expects M&M to report a healthy Q4FY21 performance, with total operating income seen at Rs 13,128 crore (up 43.6 per cent YoY). Ensuing PAT is expected at Rs 1,257 crore, the brokerage said, adding that it is subject to volatility and is expected to surprise positively as a large part of the investment write-offs at the company are behind it. On the operational front, it expects M&M's Q4FY21 Ebitda at Rs 1,834 crore, up 61.6 per cent YoY, with corresponding margins at 14 per cent.