Shares of Mahindra & Mahindra Ltd. (M&M) were trading around 3% higher on Friday, November 6, after the automaker reported its September quarter (Q2FY27) results. While the overall performance was largely in line with expectations, brokerages pointed to the contrasting outlook for the company’s auto and farm businesses.
M&M’s standalone revenue for the quarter rose 27% year-on-year to ₹42,477 crore from ₹33,422 crore. EBITDA increased just 2% to ₹4,948 crore from ₹4,862 crore, while the EBITDA margin contracted to 11.7% from 14.6% a year ago. Profit rose 13% to ₹5,102 crore from ₹4,521 crore.
On a consolidated basis, revenue grew 25% to ₹57,515 crore from ₹45,885 crore. EBITDA increased 17% to ₹10,239 crore from ₹8,719 crore, while the margin stood at 17.8% compared with 19% in the year-ago quarter.
The company’s auto business continues to see healthy demand, supported by its utility vehicle (UV) portfolio, upcoming launches and capacity expansion. However, M&M has lowered its FY27 tractor industry growth guidance to flat year-on-year, from its earlier expectation of 5% growth, citing weak monsoon conditions and low reservoir levels, particularly in Maharashtra and Karnataka.
The company also flagged that commodity costs could remain elevated in the December quarter, adding to the near-term pressure on margins.
Brokerages on M&M
Brokerages remain positive on M&M’s auto business, although they have factored in a more cautious outlook for the farm segment.
CLSA has a ‘High Conviction Outperform’ rating on M&M, with a price target of ₹4,650. The brokerage said the company’s farm EBIT margin came in at 16.8%, down 176 basis points quarter-on-quarter, while its auto EBIT margin stood at 7.7%, up 58 basis points sequentially. Both were largely in line with expectations.
CLSA said M&M remains its top pick in the auto sector, supported by sustained market share gains in the UV segment, strong execution, upcoming launches, traction in battery electric vehicles (BEVs) and capacity expansion to meet demand.
The brokerage also believes concerns around tractor volume growth have been overstated. The farm segment is expected to contribute around 30% of M&M’s FY28 consolidated EBIT, and a 5% swing in tractor volumes in either direction would have a less than 2% impact on its sum-of-the-parts valuation, CLSA said.
At current levels, M&M trades at around 15 times its FY28 consensus earnings per share, below its 10-year average price-to-earnings multiple of 17 times. CLSA believes this valuation is attractive given the company’s stronger fundamental execution.
Citi has a ‘Buy’ rating on M&M, with a price target of ₹4,330. The brokerage said the company delivered a better-than-expected performance in Q2, supported by stronger EBITDA margins.
Management’s outlook for the UV segment remains positive, with volume growth expected to benefit from capacity expansion and new launches. The demand outlook for light commercial vehicles (LCVs) is also improving, Citi said.
However, the brokerage flagged the reduction in tractor industry growth guidance to flat year-on-year in FY27 from the earlier expectation of 5%. Weak monsoon conditions and low reservoir levels, particularly in Maharashtra and Karnataka, have weighed on the outlook.
Citi has modestly raised its earnings estimates, while factoring in input-cost pressures and a weaker tractor outlook. The latter is relevant given the farm business’s higher profitability, the brokerage noted.
Bernstein has an ‘Outperform’ rating on M&M, with a price target of ₹4,100. The brokerage said the company’s next phase of growth will need to rely less on the tractor cycle, with monsoon-related risks highlighted earlier now beginning to play out.
Weaker rainfall, declining reservoir levels and pressure on farm incomes have prompted management to lower its FY27 tractor industry growth outlook to flat, Bernstein noted.
The brokerage said M&M’s broader earnings base proved valuable in the quarter. While standalone EBIT, excluding other income, grew just 2% year-on-year, consolidated EBIT on the same basis increased 19%.
This highlights the growing contribution from businesses beyond the standalone auto and farm operations, helping the group sustain growth even as its core businesses navigate a more challenging environment.
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