Tractors and better cars drive M&M’s Q1 net profit but the future is electric

• M&M’s net profit zooms 5-fold to ₹2,196 crore in Q1 on strong tractor sales and price hikes.
  
• While the company said the chip shortage is delaying its deliveries, it’s still sitting atop over 1.4 lakh orders, with the Scorpio-N leading by a huge margin.
  
• The company, like others, is also preparing for an electric future with the announcement of five new electric SUVs slated for August 15.
  

Mahindra & Mahindra, India’s leading tractor and automobile company, on Friday reported more than a 5-fold jump in its consolidated net profit to ₹2,196 crore year-on-year, aided by a double digit rise in tractor sales and price hikes.

Revenue-wise, too, M&M posted a healthy surge of 48% year-on-year, with the auto and tractor segments driving growth. While the auto segment reported a 74% increase, the tractor segment grew 18% in the same period. The three back-to-back blockbusters for the auto segment – the Thar, XUV700 and the Scorpio-N – have likely helped the automobile giant this quarter.

While profit fell 1.8% on a sequential basis, revenue grew by a healthy 9.6%, suggesting a sustained topline growth.

Particulars	Q1 FY23	Q4 FY22	Q1 FY22
Revenue	₹28,412 crore	₹25,934 crore	₹19,172 crore
Net profit	₹2,196 crore	₹2,237 crore	₹424 crore
Net margin	7.7%	8.6%	2.2%

Source: Company reports

Auto and farm segments remain the key performers in the M&M stable. More specifically, the auto segment benefited from volume growth thanks to a new model mix, while the farm segment reaped the rewards of a recovery in demand and a cool down in commodity prices.

Tech Mahindra, the group’s IT services arm, witnessed continued deal wins, but like other IT companies have realized, its margins have come under pressure, the company said. Overall, here’s how each segment of M&M has performed in Q1 FY23:

Segment	Q1 FY23	QoQ change	YoY change
Automotive	₹670 crore	10%	727%
Farm equipment	₹1,114 crore	50%	-6%
Financial services	₹296 crore	-65%	114%
Hospitality	₹48 crore	200%	400%
Real estate	-₹34 crore	42%	-42%
Others	₹304 crore	29%	94%

Source: Company reports

In the auto segment alone, Mahindra says it has over 1,40,000 open bookings – 79,000 of those are thanks to the XUV700 alone, with the Thar being a distant second at 25,000.

Not surprising then that Mahindra blamed the semiconductor chip shortage for the delays – and this is driving up costs for both consumers as well as the company itself, which has resorted to price hikes and feature removals after initial announcements.

“In M&M, one of the main reasons for the long waiting periods for delivery of vehicles is that the availability of semiconductors had slowed down to a trickle. Those lamenting the demise of a global supply network are ignoring the fact that the disruption is in the China-dominated global supply network rather than the true global supply chain,” the company said.

Yet, the company managed to increase volumes:

Particulars	Q1 FY23	QoQ change	YoY change
Total vehicles sold	1,49,803	-2%	74%
Total tractors sold	1,17,413	63%	18%

Source: Company reports

Looking beyond the ‘best quarter ever’ – M&M to unveil 5 new EVs this month

During the investor presentation, Mahindra underlined that petrol prices have become a headache for consumers, and to that end, the automaker has revealed it will unveil its EV strategy come August 15. This will include five new electric SUVs, and reports suggest that the company is recruiting 900 engineers to work on its electric vision at the Mahindra Research Valley in Chennai.

Regardless, EVs are the future and Mahindra would do well to be an active participant rather than relying on the old eVerito and e2o plus cars, which are not only outdated but beaten handily by the likes of the Tata Nexon, among others.

While tractors are its bread and butter and electric is the future, M&M is yet to talk about electric tractors. For now, electric cars will have to do.

SEE ALSO:

$4

$4

Auto sales data July 2022: Maruti and Toyota post strong growth in sales while MG Motor and Kia decline>$4