X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
M&M: Will it continue? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 30, 2002

    M&M: Will it continue?

    M&M seems to be on the turnaround path. The company has posted a sharp rise in sales in 1QFY03 on the back of impressive performance of its farm equipment segment and higher demand for UVs. M&M is back in the black with a net profit of Rs 78 m, as compared to a net loss of Rs 296 m in 1QFY02.

    (Rs m) 1QFY02 1QFY03 Change
    Net sales 6,859 8,284 20.8%
    Other Income 137 31 -77.7%
    Expenditure 6,664 7,535 13.1%
    Operating Profit (EBDIT) 195 749 284.2%
    Operating Profit Margin (%) 2.8% 9.0%  
    Interest 217 249 14.7%
    Depreciation 373 406 8.8%
    Profit before Tax (258) 125 -
    Extraordinary items (38) - -
    Tax - 48 -
    Profit after Tax/(Loss) (296) 78 -
    Net profit margin (%) -4.3% 0.9%  
    No. of Shares (m) 110.5 110.5  
    Diluted Earnings per share* (10.7) 2.8  
    P/E Ratio (x)   33.3  
    (* annualised)      

    While industry demand for tractor has remained subdued in 1QFY03, M&M has managed to outperform the industry and gain market share during the same period. Industry tractor volumes have declined by 5% to 46,775 units in 1QFY03. On the other hand, M&M's unit sales have gone up 14% to 14,716 units. But this could also be on account of aggressive dealer push strategy and higher credit sales by the company. One has to wait for M&M's performance in 2QFY03 to gauge the actual industry demand scenario. Keeping in mind the draught-like situation in select Northern and Southern regions, tractor industry is expected to witness a 7% drop in volumes in FY03.

    Volumes in 1QFY03…
    (Nos) 1QFY02 1QFY03 Change (%)
    Tractors 12,934 14,716 13.8%
    % share 27.7% 33.1%  
    UVs 12,256 13,241 8.0%
    % share 44.0% 48.9%  
    LCVs 1,128 1,881 66.8%
    % share 10.7% 14.3%  
    Total 26,318 29,838 13.4%
    Source: M&M website

    Against the industry drop of 3% in UVs, M&M has posted a 8% rise in volumes, which could have been led by new model introduction like 'Camper' and 'Maxx' range of vehicles. Contribution from 'Scorpio', the newly launched SUV, is still small when compared to its overall sales in the UV segment. Surprisingly, there has been a marked revival in LCV demand off late that is apparant from a 25% rise in industry volumes. M&M has outperformed the industry on this front as well (but on a lower base). While we expect M&M to continue its impressive performance on the UV front, volume growth for other segments is expected to remain lacklustre for FY03.

    Market share gains…
    (% change)* Industry M&M
    Tractors -4.8% 13.8%
    UVs -2.7% 8.0%
    LCVs 24.7% 66.8%
    *1QFY03 over 1QFY02

    While volumes have increased by 13%, turnover has gone up by 20% reflecting improved product mix. A sharp rise in margins is on account of savings in employee expenses post VRS and other value engineering efforts initiated by M&M last year. The rise in interest cost is primarily on account of higher debt raised by M&M in FY02. While total debt had gone up by Rs 7.2 bn in FY02, average interest costs was 9%. The rise in interest expenses could also be on account of higher working capital requirement to fund credit sales. Over the last one and half years, tractor majors have seen a sharp rise in credit days due to stiff competition and lower offtake. M&M's receivables days had gone up to 58 days in FY02 as compared to 54 days in FY01. Since M&M wrote-off all miscelleneous expenses against share premium reserves in FY02, extraordinary items are nil in 1QFY03.

    The stock currently trades at Rs 94 implying a P/E multiple of 33.3x 1QFY03 annualised earnings. On FY03E earnings, P/E multiple works out to 9.4x. The initial response to 'Scorpio' has been impressive and as a result we expect M&M to increase its market share in UV segment in FY03. However, tractor demand will remain subdued for the next 12 months in light of high inventory in the sector and lower offtake. Keeping the aforesaid factors in mind, overall volume growth for the company is expected to be around 7% levels in FY03.

     

     

    Equitymaster requests your view! Post a comment on "M&M: Will it continue?". Click here!

      
     

    More Views on News

    Mahindra & Mahindra Ltd: Robust Performance amid Uncertainties! (Quarterly Results Update - Detailed)

    Jul 4, 2017

    The Growth in the Farm Segment offsets mediocre performance in the auto business.

    Mahindra & Mahindra Ltd: Tractor Demand offsets the Notebandi hit Auto Segment! (Quarterly Results Update - Detailed)

    Mar 20, 2017

    Mahindra & Mahindra has announced its financial results for the third quarter of the financial year 2016-17 (2QFY17).

    Mahindra & Mahindra Ltd: Tractors Demand Upbeat, Gaining Market Share in Auto (Quarterly Results Update - Detailed)

    Nov 22, 2016

    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%.

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    M&M SHARE PRICE


    Aug 21, 2017 (Close)

    TRACK M&M

    M&M - BAJAJ AUTO COMPARISON

    Compare Company With Charts

    COMPARE M&M WITH

    MARKET STATS