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M&M’s net realisation improved 13% y-o-y to ~Rs 748.5k/unit (v/s est. Rs 744.8k/unit). Volumes grew 13% y-o-y in Q4FY22. Net revenue grew 28% y-o-y to Rs 171.2 bn (v/s est. Rs 170.4 bn). Gross margin contracted ~730bp y-o-y to 23.6% (v/s est. 24.6%), impacted adversely by higher raw material (RM) cost and weaker mix. However, the benefit of operating leverage restricted Ebitda margin decline to ~320bp y-o-y only at 11.4% (v/s est. 10.3%).

Ebitda was flat y-o-y at ~Rs 19.45 bn (v/s est. ~Rs 17.6 bn). PBIT margin for the Auto business improved 60bp y-o-y (+190bp q-o-q) to 5.6%. However, PBIT margin for the Tractor business contracted 630bp y-o-y (-160bp q-o-q) to 15.7%. Higher other income and lower tax boosted adj. PAT to Rs 11.9 bn (v/s est. ~Rs 8.7 bn); adj. PAT grew 19% y-o-y.

Contributions from subs/JVs/associates continued to improve, with net contribution at ~Rs 10.9 bn in FY22 (v/s +Rs 5.4 bn in FY21). Net contribution from the Auto subs at PBIT level was negative Rs 834 mn (v/s negative Rs 936 mn in FY21). Farm subsidiaries recorded the seventh consecutive quarter of positive Ebit. For FY22, net contribution from FES subs at PBIT level was positive Rs 3.1 bn (v/s negative Rs 349 mn in FY21).

Overall, there were 170k+ open bookings. XUV7OO is leading the way with 78k-plus open bookings. Semiconductor supplies improved in Q4FY22, resulting in the highest ever quarterly UV volumes. FCFF stood at Rs 39.1 bn (v/s Rs 62.8 bn in FY21) due to lower CFO, which was at Rs 70.9 bn (v/s Rs 95.9 bn in FY21). The management announced a final dividend of Rs 11.55/share.

Excerpt from the statement made by Anish Shah, director and CEO, M&M: “Our performance in Q4 and FY22 underscores the resilience of our business model. Despite significant challenges due to various factors like Covid, commodity prices, semiconductor shortages and the Ukraine conflict, we have delivered strong results at the consolidated level. All of our group companies are well positioned to capitalise on growth opportunities.”

Valuation and view: The stock trades at 21.2x/15.9x FY23E/FY24E EPS. ‘Buy’ rating maintained.

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Author: Howard Caldwell