Mahindra & Mahindra vs Maruti Q2 FY25

M&M delivered a strong Q2 FY25 with consolidated PAT up 35% YoY to INR 3,171 crore, driven by broad-based strength across auto, farm, and services. Auto revenue grew 15% YoY with PBIT margin expanding 140bps, supported by market share gains (21.9%) and successful price repositioning of XUV700. Farm domestic margins improved 150bps to 18.7% despite international headwinds. Services PAT surged 80% YoY, led by Tech Mahindra and Mahindra Finance. Management guided for mid-to-high teens auto volume growth and 6-7% tractor industry growth in H2, with EV launches (BE 6e, XEV 9e) in early 2025. Key risk: elevated launch costs and EV ramp-up may pressure near-term margins.

Guidance read

Auto volume growth of mid-to-high teens: Management expects full-year SUV portfolio volume growth of 15%-18%. Tractor industry growth of 6-7% for FY25: Revised tractor industry growth outlook to 6%-7% for the full year, implying 13%-15% H2 growth. EV launches in early 2025: Two electric origin SUVs (BE 6e and XEV 9e) to be revealed in November 2024 and in market early 2025. Auto PBIT margin medium-term goal of ~10%: Management targets auto PBIT margin to first reach FY19 levels of around 10% as a medium-term goal.

Risk read

Key risks include International farm business stress — North American tractor market has shrunk significantly (11 quarters of degrowth) and Turkish hyperinflation impacts accounting; management is evaluating but not exiting yet.; Urban demand slowdown — Management acknowledged fundamental stress in urban India, which could impact SUV demand if not offset by rural recovery.; EV launch costs and margin dilution — Q3 will see marketing and depreciation costs for EVs with no revenue, and EV margins as a percentage will be lower than ICE due to denominator effect.; LCV demand recovery uncertainty — LCV industry has been subdued for several quarters; while October showed positive turnaround, sustainability is uncertain..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.

Maruti Suzuki reported Q2 FY25 net sales of INR 35,589 crore, nearly flat YoY, while PAT fell 17.4% to INR 3,069 crore due to a one-time tax provision. Domestic wholesale volumes declined 3.9% YoY, but exports grew 12.1%. Festive retail sales surged 14% YoY, driven by rural demand and higher discounts averaging INR 29,300 per car. CNG mix reached 33% of sales. Management expects full-year retail growth of 3-4% and stable discounts. The upcoming EV launch in January 2025 and Kharkhoda plant commissioning by Q4 are key catalysts. Risk: small car segment remains weak due to affordability challenges, with no clear recovery timeline.

Guidance read

Full-year retail sales growth of 3-4%: Management expects retail sales to grow 3-4% for FY25, with April-October already at 3.9%. Kharkhoda plant commissioning by Q4 FY25: The new 300,000-unit capacity plant in Kharkhoda is on track to be commissioned by end of this financial year. EV launch in January 2025 with high range: The first EV (e-SUV) will be launched at Bharat Mobility Global Expo, featuring a ~60 kWh battery and high range. One EV launch per year on average till end of decade: Management plans to launch 5-6 EVs by the end of the decade, averaging one per year.

Risk read

Key risks include Small car segment weakness — Affordability challenges persist in the small car segment, with no clear recovery timeline despite limited edition launches.; Discount pressure on margins — Higher discounts (INR 29,300/car) are compressing margins; sustainability depends on demand recovery.; Yen volatility and hedging effectiveness — CFO noted yen uncertainty due to macro factors (US elections), though hedging is being stepped up to reduce volatility.; Model portfolio complexity — Expanding to 28 models from 18 raises complexity in dealership footprint and operations, acknowledged by management as a key challenge..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.