- 30 Oct 2024
- ICICI Securities
HIGH RM COSTS AND DISCOUNTS DENT MARGINS IN Q2FY25
News: MSIL reported muted performance in Q2FY25. Sales volume for the quarter stood at 5.4 lakh units, down 2% YoY. Total operating income for Q2FY25 came in at ₹ 37,203 crore with ensuing ASPs at ₹6.57 lakh/unit, up 1.2% QoQ. SUV share of sales in total domestic PV sales volume stood at ~40% (up 3% QoQ). EBITDA margins for the quarter came in at 11.9%, down 80 bps QoQ. Consequent PAT in Q2FY25 came in at ₹3,069 crore, down ~17.4% YoY and ~16% QoQ. Reported PAT includes an exceptional one-time deferred tax provision of ₹ 838 crore.
Views: MSIL witnessed a positive demand trajectory during this festive season, with retail sales increasing by 14% YoY for the period starting from Shradh till Diwali. Consequently, it is projecting a 3% to 4% YoY growth in the retail space in FY25. During the quarter, increase in sales promotion, high average discounts at ₹29,300 and higher commodity prices impacted the EBITDA margin profile. For MSIL, rural demand is outpacing urban demand with stagnant sales for small cars (hatchbacks) with Wagon R gaining some traction. CNG portfolio continues to perform well at the company with current penetration flat on QoQ basis at 33%. Post the recent correction, MSIL now trades at ~20x PE on FY26E, which is lower than its long period averages. However, amid tepid growth prospects in the near term, we have a neutral view on the stock.
Impact: Neutral