M&M reports strong improvement in profitability in Q1

Mahindra & Mahindra’s operating profit recorded robust growth on the back of double-digit volume improvement with a favorable mix, moderation in input cost inflation and higher average selling price.

By Kiran Murali

31 Jul 2024

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M&M reports strong improvement in profitability in Q1

Mahindra & Mahindra Ltd on Wednesday reported a decline of 5% in its standalone net profit for the first quarter of financial year 2025 on a year-on-year basis. However, the net profit excluding the previous year's one-time gains grew 23% on year, driven by robust double-digit volume improvement with a favorable mix, moderation in input cost inflation and higher average selling price.

On a reported basis, profit fell despite robust operating performance due to a high base in the comparable period. The company had recorded a one-time gain in the year-ago period following the gains from the stake sale in KG Mobility and Mahindra Automotive CIE.

The Mumbai-based automaker clocked a standalone net profit of Rs 2,613 crore, against Rs 2,759 crore in the year-ago period. Revenue from operations rose 11% to Rs 27,133 crore. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), or operating profit, grew 16% on year to Rs 4,116 crore while the operating profit margin expanded to 15.2% from 14.5%. Excluding income from investments, operating margin rose to 14.9% from 13.6% in the year-ago period.

"There is a 20% gain in operational profits for the first quarter of FY25. The reported PAT drop is on account of two one off gains last year; we had a gain of Rs 405 crore on our KG Mobility investment at the time of listing of the stock and we recorded a gain on sale of our stake in MCIE for Rs 358 crore. These numbers – adding up to Rs 763 crore - are not repeated in this year’s [Q1 FY25] numbers", the company stated.

M&M’s revenue improved primarily from 11% growth in total vehicle sales to 2.12 lakh units. Sales grew at a higher rate in the passenger vehicle segment, up 24% on year to 124,248 units. The automaker, being a pure SUV player, has been outpacing the industry growth and improving market share amid robust demand for SUV products.

Commercial vehicle sales rose just by 2% to 62,522 units. The commercial vehicle segment witnessed some disruption in April and May due to the general election. In the farm equipment segment, tractor sales rose 5% to 1.20 lakh units as dealers ramped up inventory, anticipating strong demand during the festival season.

“In Q1 F25, we gained market share in both Auto & Farm businesses. We achieved the highest-ever quarterly tractor volumes. We retained market leadership in SUVs with 21.6% revenue market share and in LCVs < 3.5T, we crossed 50.9% volume market share,” M&MExecutive Director & CEO for Auto and Farm Sector Rajesh Jejurikar said.

Total expenses, including the cost of materials consumed, increased during the quarter. Total expenses grew 10% on year to Rs 23,984 crore while the cost of materials rose 11% to Rs 18,411 crore.

Other income in the three months also plunged around 60% on year to Rs 257.55 crore, while tax expenses increased to Rs 793.59 crore from Rs 581.92 in the year-ago period.