Agriculture impacts M & M's tractor volumes - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Agriculture impacts M & M's tractor volumes

Jun 5, 2000

Automobile major Mahindra & Mahindra ( M & M's) tractor sales performance is directly linked to the performance of the agriculture sector. However the effect of this on the company's performance is normally with a time lag of one year. The impact of agricultural performance on rural incomes affects the performance after one year. Mahindra & Mahindra ( M & M) is a dominant player in the UV market (58.2% market share in FY2000) and the tractor market (27.4% market share in FY2000). The strategy of introducing new products, and increasing retail sales has paid off and the company was able to increase its market share in both these segments in FY2000.

As can be seen from the above chart, agriculture production has been quite buoyant in the last couple of years, except for FY98 when agricultural growth reported a decline. Besides the impact of YoY growth of agriculture production on tractor sales, the fact that India is entering the 13th consecutive year of normal monsoons augurs well for the sector. In FY99 the agricultural production was 8.2% YoY, while tractor sales for the industry grew by only 1.2% YoY in FY2000. This can be attributed to over production by tractor manufacturers leading to higher dealer inventories in the past, the impact of which was felt in FY2000 .

Considering that the current CMIE agricultural production forecast for FY2000 is -3.1%, hence it is expected that tractor sales in the current financial year are not expected to do well, due to the time lag. Also keeping in mind the drought conditions in many parts of the country in the current year agricultural growth would remain affected due to this.

Going forward the success of the company's new models in the utility vehicle and tractor segment, its market leadership, the potential of its software investments and its venture Mahindra British Telecom in which the company has a 60% stake are positive for the company.

M & M at the current price of Rs 221 is trading at a price to earnings multiple of 9.3x FY2000 earnings.

Equitymaster requests your view! Post a comment on "Agriculture impacts M & M's tractor volumes". Click here!


More Views on News

M&M Announces Quarterly Results (1QFY22); Net Profit Down 482.2% (Quarterly Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

For the quarter ended June 2021, M&M has posted a net profit of Rs 7 bn (down 482.2% YoY). Sales on the other hand came in at Rs 192 bn (up 60.2% YoY). Read on for a complete analysis of M&M's quarterly results.

M&M Announces Quarterly Results (4QFY21); Net Profit Up 295.7% (Quarterly Result Update)

Jul 8, 2021 | Updated on Jul 8, 2021

For the quarter ended March 2021, M&M has posted a net profit of Rs 13 bn (up 295.7% YoY). Sales on the other hand came in at Rs 215 bn (up 31.5% YoY). Read on for a complete analysis of M&M's quarterly results.

Mahindra & Mahindra Shares Surge on Bagging Contract for Defense Equipment (Views On News)

Jun 4, 2021

Mahindra & Mahindra has signed a contract with the Ministry of Defence.

Forget Tesla. Here Are 3 Indian Companies Betting Big on EVs (Views On News)

Jul 9, 2021

Three stocks to watch out as India's EV revolution gets underway.

Massive Surge in the Shares of Tata Motors Today. Key Factors Favouring the Rally (Views On News)

Oct 13, 2021

Tata Motors zooms 23% after report of TPG investing Rs 75 bn in EV arm.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 7, 2021 11:42 AM