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 (1QFY21); Net Profit Down 95.2% (Quarterly Result Update)

Aug 7, 2020 | Updated on Aug 7, 2020

For the quarter ended June 2020, M&M has posted a net profit of Rs 1 bn (down 95.2% YoY). Sales on the other hand came in at Rs 56 bn (down 56.6% YoY). Read on for a complete analysis of M&M's quarterly results.

M&M Announces Quarterly Results (3QFY20); Net Profit Down 71.5% (Quarterly Result Update)

Feb 10, 2020 | Updated on Feb 10, 2020

For the quarter ended December 2019, M&M has posted a net profit of Rs 3 bn (down 71.5% YoY). Sales on the other hand came in at Rs 123 bn (down 5.5% YoY). Read on for a complete analysis of M&M's quarterly results.

M&M 2018-19 Annual Report Analysis (Annual Result Update)

Jul 9, 2019 | Updated on Jul 9, 2019

Here's an analysis of the annual report of M&M for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of M&M. Also includes updates on the valuation of M&M.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 30, 2020 11:11 AM