M & M Q1 FY27 Results (NSE: M&M)
Signal: Margin expansion
The read
Q1FY27 was a beat across all metrics: revenue grew 26.6% YoY, PAT 37.0% YoY, and EBITDA margin (ex-investment income) expanded for the 5th consecutive quarter to 13.57%. The core auto business surged on strong volume growth (June monthly sales +32.5% YoY) and the diversified industrial/consumer services segment delivered explosive profit growth (+377% YoY). Employee cost grew at only 11.3% vs revenue +26.6%, providing strong operating leverage. However, PAT was boosted by a one-off gain of ₹641 Cr from sale of an associate investment — excluding this, PAT growth was ~22% YoY, still strong. Automotive segment margin slightly compressed due to higher competitive spending and model mix shift, but overall corporate margin profile continues to improve. The balance sheet remains fortress-like with net debt (ex-Financial Services) negligible.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹57,533.44 Cr | +26.6% | +4.8% |
| EBIT | ₹7,260.6 Cr | +40.5% | |
| Net profit | ₹5,997.56 Cr | +37.0% | |
| EPS | ₹48.8 | +33.4% | |
| EBIT margin | 14.09% |
P&L walk
Revenue grew 26.6% YoY to ₹57,533 Cr, driven by automotive (+32.3%) and industrial/consumer services (+46.9%). Gross margin (cost of materials as % of revenue from ops) improved 50bps YoY from 58.8% to 58.3%, mainly due to operating leverage. EBITDA margin (ex-investment income) expanded 27bps YoY to 13.57%; including investment income it expanded 102bps to 14.09% — the 5th consecutive quarter of expansion. Employee cost grew just 11.3% vs revenue +26.6%, a key driver of operating leverage. Finance costs rose only 5.3% YoY despite higher borrowings. PAT was boosted by a one-off ₹641 Cr gain on sale of an associate investment (included in 'Income from investments'). Excluding this one-off, PAT growth would have been ~22% YoY. EPS of ₹48.80 grew 33.4% YoY, slightly lagging PAT growth of 37.0% due to a small equity dilution (shares outstanding up ~0.5% YoY).
Segments
The Automotive segment led revenue growth (+32.3% YoY) with segment result surging 27.2% YoY to ₹2,650 Cr; Farm Equipment revenue grew 14.8% YoY with result up 9.3% YoY; Industrial Businesses and Consumer Services was the standout with revenue +46.9% YoY and result +377.1% YoY to ₹995 Cr, driven by IT services and aftermarket. Financial Services revenue grew 14.6% YoY with result up 81.0% YoY as credit demand remained strong. All four segments posted YoY profit growth.
Key positives
- Revenue +26.6% YoY to ₹57,533 Cr, the highest Q1 revenue ever, driven by all segments growing double-digits.
- EBITDA margin (incl. investment income) expanded 102bps YoY to 14.09%, the 5th consecutive quarter of margin expansion.
- Employee cost grew only 11.3% vs revenue +26.6%, delivering strong operating leverage.
- Industrial Businesses and Consumer Services revenue surged 46.9% YoY and segment profit skyrocketed 377% YoY to ₹995 Cr.
- Automotive segment revenue +32.3% YoY, reflecting strong demand (June monthly sales +32.5% YoY).
- PAT (attributable to owners) +33.6% YoY to ₹5,455 Cr; basic EPS ₹48.80, +33.4% YoY.
- Debt-equity ratio (ex-Financial Services) remains ultra-low at 0.04x.
- Interest Service Coverage Ratio improved to 37.37x from 31.74x a year ago.
- Net worth crossed ₹95,949 Cr, up 18.2% YoY.
Key concerns
- PAT included a one-off gain of ₹641 Cr from sale of an associate investment; excluding this, PAT growth was ~22% YoY vs headline +37%.
- Automotive segment margin (segment result/revenue) contracted from 8.0% to 7.7% QoQ, indicating competitive pressure / mix shift.
- Farm Equipment segment margin contracted from 15.0% to 14.3% YoY, despite strong QoQ revenue growth (+24.7%).
- Employee cost as % of revenue (5.9% vs 6.7% YoY) improved, but the absolute level may rise with hiring for new EV and SUV models.
Research and educational content only. Not investment advice.