M&M - Demand Sustains Amid Macro Uncertainties: Motilal Oswal

Motilal Oswal Report

We met with the management of Mahindra and Mahindra Ltd. to gauge the overall environment – both at macro and company levels. Management indicated that demand environment for the auto business has been stable in general but it expects slower growth for tractors in FY24 (even under normal monsoons) due to high base and three Navratras in FY23.

While chip supply is improving, it is still not adequate enough to ramp-up production meaningfully. Chip supply is the only restricting factor to reach full capacity for production of sports utility vehicles.

Profitability of both businesses should improve though ramp-up of new businesses (electric vehicles and farm equipment) would dilute expansion.

However, commodity cost inflation visible from the lows of Q3 FY23 is the primary risk of M&M’s business.

We cut our FY24E earnings per share by 8% to factor in lower tractor/SUV volumes, and the adverse impact of losses from new businesses.

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