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.