Mahindra & Mahindra (M&M), the diversified auto major, has reported a 36% fall in profits for the third quarter ended December 31, 2001. While turnover has increased in 3QFY02 marginally, thanks to the encouraging performance of its newly launched utility vehicle 'Bolero', for the first nine months of the current fiscal, the performance is not encouraging.
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*annualised, ** after considering prior period adjustments
The company has lost market share in the tractor segment, which accounted for 44% of sales in FY01, in the current fiscal. M&M's market share stood at 26% in 1HFY02 compared to 33% in the corresponding period previous year. While industry sales fell by 17% in the first half, M&M's tractor sales declined by 35%. Though the trend seems to have reversed in 3QFY02, value growth is unlikely in light of excess inventory build-up in the industry.
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But M&M has successfully increased its market share in the UV segment thanks to the resounding performance of 'Bolero'. The automotive division contribution to sales has increased from 53% in 3QFY02 to 55% in the first nine months of the current fiscal. Margins have improved in 3QFY02 and are in line with expectations. But in 9mFY02 operating margins are lower by 70 basis points and this could be attributed to the destocking initiative taken by the company in 1HFY02 coupled with pricing pressure.
During the quarter, Gesco Corporation Limited has become a subsidiary of the company consequent upon the demerger of the Realty and Infrastructure businesses of Mahindra Realty and Infrastructure Developers Limited into Gesco Corporation Limited.
Net profit for 3QFY02 has declined by 36% after considering expenses towards voluntary retirement scheme to the tune of Rs 83 m. Extraordinary item also includes Rs 37 m towards prior period adjustments.
The stock currently trades at Rs 109 implying a P/E multiple of 12.4x annualised 3QFY02 earnings. M&M is expected to launch new models in 1QFY03 under its 'Project Scorpio' towards which it had spent Rs 6 bn. Though the company is optimistic of the new project, one has to be cautious on this front in light of the prevailing competitive environment. While the company's strategy on the export front is encouraging, it had to bear the burnt of excessive production of tractors in anticipation of a rise in demand in the current fiscal. But with rural demand showing signs of recovery, M&M is expected to perform well in FY03.
Mahindra & Mahindra has announced its financial results for the second quarter of the financial year 2016-17 (2QFY17). During the quarter, revenues grew by 15.6% YoY and adjusted net profits grew by 18.5%.
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