Mahindra & Mahindra Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Mahindra & Mahindra Limited (M&M) Q3 FY24 Earnings Concall

• Auto/Farm Performance
  • Mahindra Auto continues strong momentum, gaining SUV market share to 21% and becoming #1 in SUVs.
  • Mahindra at 49.6% market share in LCVs after gaining significantly.
  • Auto performance showing benefits of strategic focus on SUVs and LCVs, with strong market share gains.
  • New bookings at 50k per month with supply increased to 40k.
  • Seeing higher cancellations in December and turn of year
  • Farm industry expected to be down 5-6%, but Mahindra gained 80 bps share.
  • Mahindra Farm now over 40% market share, exemplifying strong execution.
  • Some indicators showing potential for improvement, but overall continued weakness in rural spending power.
• Finance Turnaround
  • Mahindra Finance GS3 at all-time low of 4%, showing risk management.
  • Strong disbursement growth and sequential NIM increase at Finance.
  • Resulting improvement has turnaround firmly on track.
• Auto Capacity Expansion
  • On track for 49k capacity exiting FY23 as previously guided.
  • M7M won’t fully utilize for next 2-3 months due to factors.
  • Projecting higher mid-teen volume growth, ahead of industry.
• Growth Drivers
  • Financial services saw 24% revenue growth, with Mahindra Accelo at 21%.
  • Beyond Auto and Farm, other businesses contributing.
  • Adjusting for Susten gain and impairment, profits grew 34%.
  • Auto profits major driver of increase at addition of INR721cr.
• Finance Business Update
  • Finance profits down but credit quality improving.
  • Absence of prior year credit cost reversals impacting.
  • But underlying business on track based on targets.
• Order Book Status
  • Thar, Scorpio Classic, Scorpio N have long waiting periods.
  • Bolero available without delay.
  • XUV300 being ramped down ahead of mid-cycle refresh.
  • With 2.5-3 year old XUV700, need to signal faster availability.
  • Open up lower variants to broaden funnel from INR25L top-end focus.
• Electric Vehicle
  • Recent EV price cuts from competition after M&M cuts.
  • Enabled by battery price declines amid still small category.
  • M&M targeting 25% share with upgraded XUV400 launch.
  • EV adoption has faced issues like range anxiety.
  • Ecosystems expected to develop over time.
• Margin Growth Outlook
  • Growth more important than margins for 2023.
  • Will use cost levers to maintain affordability.
  • Expect continued business performance improvement.
• Emission Compliance
  • Comfortably meeting 2024 CAFE norm requirements.
  • Don’t foresee added EV needs before BS7 norm.
  • Current EV volumes sufficient looking ahead.
• Rural Exposure/Potential
  • Slowdown impacted Bolero with rural exposure.
  • Rural-driven Scorpio Classic very strong.
  • Bolero and XUV300 can see uplift with rural recovery.
  • However, not expecting dramatic bounce back effect as performance driven more by wider trends.
• Thar/Scorpio Capacity Expansion
  • Current Thar capacity split evenly between 2WD and 4WD.
  • 2WD ramp-up constrained by 1.5L engine availability.
  • 5-door Thar capacity separate and on track.
  • Underestimated continued strong demand for Classic.
  • Incremental capacity increases challenging and limited.
  • Expect Classic volumes to remain around 4-4.5K/month.
• ICE Product Roadmap
  • Significant ICE launches upcoming with Thar 5-door and XUV300.
  • Conscious of still needing strong ICE portfolio amid EV shift.
• Tractor/Truck Demand Trends
  • Southern markets slowing more than other regions now.
  • Leading to margin mix impact with south higher HP bias.
  • Selective market activation with top dealers first for trucks.
  • Calibrated approach to prove model before scaling.
  • Can attain >INR10k cr revenue at 7-8% share for trucks.