A blockbuster Q3 built on SUV dominance, a farm equipment supercycle and an EV business inching toward viability. Capacity expansion is the next act — and the one that matters most.
There are quarters that confirm a thesis, and then there are quarters that make you wonder if the thesis is still too conservative. Mahindra & Mahindra’s Q3FY26 was closer to the latter. Standalone revenue surged 26.1% year-on-year to Rs 385.2 billion, EBITDA rose 26.8% to Rs 56.7 billion, and adjusted profit after tax came in at roughly Rs 40 billion — a 35.1% jump that beat street estimates. The numbers were not just good. They were comprehensive.
Running Two Engines Well
What makes Mahindra’s current form particularly impressive is that neither the auto nor the farm equipment business is carrying the other. Both are delivering. Total volumes grew 23.2% year-on-year to approximately 454,000 units. SUV volumes alone rose 26% to 178,900 units, “led by festive and GST-cut momentum while sustaining leadership with revenue market share stabilizing at ~24%,” says Centrum. Light commercial vehicle volumes climbed 20%, benefiting from what Centrum describes as an ignited “replacement cycle post-COVID delay, with Q3 demand robust beyond festive.”
The farm equipment segment was equally strong. Tractor industry volumes are on track to grow approximately 24% in FY26. YES Securities notes that “the company continues to maintain a strong market position with ~44% market share, driven by new product launches and better regional performance.” Core tractor EBIT margins expanded 170 basis points year-on-year to 21.2%, a level that reflects genuine operating leverage rather than one-off tailwinds.
Blended average selling price grew 2.4% year-on-year to roughly Rs 848,500 per unit. Auto ASP stood at Rs 1.05 million per unit, while farm ASP came in at Rs 681,900. The mix is moving in the right direction — higher-variant SUVs pulling realisations up even as volume growth does the heavy lifting on the top line.
Margins Held Up Where It Mattered
The gross margin picture was not flawless. Gross margins contracted 180 basis points year-on-year to 23.8%, pressured by commodity costs. But EBITDA margins held at 14.7%, up 10 basis points year-on-year and 20 basis points sequentially. The offset came from disciplined cost management — YES Securities highlights that other expenses came in at Rs 21.1 billion, up just 2.7% year-on-year despite the volume surge, demonstrating meaningful operating leverage.
At the segmental level, auto reported margins of 9.5%, which includes a 90 basis point dilution from battery electric vehicle operations. YES Securities makes an important observation here: “given XUV7OO volume ramp-down ahead of XUV7X0, auto margins remained robust.” In other words, the margin held up during a product transition, which is typically when margins are most vulnerable. Core auto EBIT margin excluding contract manufacturing improved to 10.4% from 9.7% a year ago, notes Centrum.
The BEV business generated Rs 1.75 billion in EBITDA with 6% margins. Centrum notes this was “aided by PLI accruals (~13%) and improved fixed-cost absorption at higher volumes.” Management has signalled that “BEV profitability should structurally converge toward ICE margins with scale,” says Centrum — a statement that is easy to make and hard to deliver, but one that the trajectory at least partially supports.
Capacity Is the Next Constraint
The launch pipeline and capacity expansion roadmap is where Mahindra’s medium-term story gets interesting. The XUV 7XO “continues to witness strong traction, with over 70% of bookings skewed towards the top 2 variants, resulting in longer waiting periods,” says Centrum. The BEV 9S is drawing positive feedback, particularly in northern India.
On the capacity front, Centrum lays out a phased build-out: an additional 6,000-7,000 units per month in CY26, split between ICE debottlenecking across XUV3XO, Bolero, Scorpio-N and Thar, and roughly 3,000 EV units. CY27 brings another 7,000-8,000 units from the Chakan NU-IQ platform powering the Vision S, T and X models. The Nagpur greenfield facility ramps to 10,000-12,000 units in its first year in CY28.
YES Securities flags one near-term risk worth watching: “memory chip availability both for ICE and EVs.” It is a reminder that even the best demand story can be tripped up by supply chain bottlenecks that sit entirely outside management’s control.
Valuations Arguably Earned
YES Securities retains a BUY with a sum-of-the-parts target price of Rs 4,273, noting that “implied core P/E for MM stands at 25.4x/22.5x FY27/FY28E EPS” and calling the valuation “attractive.” The brokerage expects revenue, EBITDA and PAT CAGR of 12-15% over FY25-28E. Centrum, which does not carry a formal rating, observes that consensus is building an EPS CAGR of 17.1% over the same period, with the stock trading at 26x/23x consensus FY27/FY28 earnings.
