Tractors and utility vehicles giant Mahindra & Mahindra has reported a 78% decline in net to Rs 132 m for the 2QFY01. Its sales went up from Rs 8,262 m in the 2QFY00 to Rs 8,399 m in the 2QFY01, a miniscule 1% growth.
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Though we were expecting a decline in profits for M & M in this quarter, these results are worse than our expectations. Hence we would have to downgrade and review our current FY01E forecasts.
The main reasons for the above performance seem to be the dismal demand conditions in both its main businesses, tractors and utility vehicles (UVs).
Its UV volumes have declined by 18% YoY to 25,798 units for the 1HFY01. The main reasons for this performance has been the uniform sales tax at 12% and the drought like conditions that prevailed earlier in certain states. Its market share in the UV segment has fallen to 46.2% in the 1HFY01, as compared to 60.7% in 1HFY00.
Light commercial vehicles
In the tractor industry, M & M has managed to increase its volumes in a declining market. Its volumes for the 1HFY01 went up by 9.5%YoY to 40,150, while all other players saw a decline in their volumes. Its market share too rose from 28.8% in the 1HFY00 to 35.7% in the 1HFY01. The main reason mentioned by the company for better performance is the strong efforts of the company's sales force, even in the drought like conditions.
However as the overall tractor market has been lackluster, the company's realisations in this segment have been under pressure. Besides the costs related to Euro compliance too are being absorbed by M & M, as they do not want to pass it on to consumers. This too will put a pressure on the company's operating margins.
On the current price of Rs 140 it is trading at 5.9x, FY00 EPS of Rs 23.8. The stock was up 4% in today's trading.
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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