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M&M: Rain, rain come again! - Views on News from Equitymaster
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  • May 28, 2001

    M&M: Rain, rain come again!

    Mahindra & Mahindra Ltd, India's second largest multi-utility vechile manufacturer, has reported a net profit of Rs 293 m for the quarter ended March 31, 2001, a decline of 61% compared to the corresponding period last year. The main reasons for the sharp drop in operating margins was high costs associated with euro compliance. The company did not pass on the cost due to subdued demand during the year. Another reason is the fact new product launches in both the tractor and automotive segments have lower profit margins, as compared to already established older products.

    (Rs m) 4QFY00 4QFY01 % Change FY00 FY01 % change
    Sales 8,725 9,451 8.3% 35,692 35,385 -0.9%
    Other Income 535 69 -87.1% 667 591 -11.4%
    Expenditure 7,588 8,696 14.6% 30,911 32,667 5.7%
    Operating Profit (EBDIT) 1,137 755 -33.6% 4,781 2,718 -43.1%
    Operating Profit Margin (%) 13.0% 8.0% -38.7% 13.4% 7.7%
    Interest 303 156 -48.5% 746 622 -16.6%
    Depreciation 333 385 15.6% 1,233 1,401 13.6%
    Profit before Tax 1,036 283 -72.7% 3,469 1,286 -62.9%
    Extraordinary Income 0   36 -
    Tax 295 -10 -103.4% 870 80 -90.8%
    Profit after Tax/(Loss) 741 293 -60.5% 2,635 1,206 -54.2%
    Net profit margin (%) 8.5% 3.1%   7.4% 3.4%
    No. of Shares (eoy) (m) 110 110   110.0 110.0  
    Diluted Earnings per share* 26.9 10.7   24.0 11.0  
    P/E (at current price) 4.6 11.6   5.2 11.3  
    (*- annualised)          

    In the farm equipment sector, though the company increased its market share substantially to 33.6% as against 27.1% in the previous year, it recorded a slight drop in the last quarter. The company sold 79,237 tractors during the year registering a growth of 12%. However, this is remarkable in light of negative growth registered by the industry during the year. M&M's recent launch of the "Arjun" series in the high horse power segment has received a good response. "Arjun" is targeted towards knowledgeable rich farmers.

    The company recorded a sharp drop in volumes in the automotive segment reflecting sluggish demand growth in the economy.

    Particulars FY01 FY00 % Change
    Utility Vehicles 56095 69682 -19.5%
    Light commercial vehicles 5863 6373 -8.0%

    At the current market price of Rs 124, the stock is quoting at 11 times its FY01 earnings. With the forecast of a normal monsoon, one can expect volumes to improve in the current year.



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