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Mahindra & Mahindra Ltd: Tractors Demand Upbeat, Gaining Market Share in Auto - Views on News from Equitymaster
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  • Nov 22, 2016 - Mahindra & Mahindra Ltd: Tractors Demand Upbeat, Gaining Market Share in Auto

Mahindra & Mahindra Ltd: Tractors Demand Upbeat, Gaining Market Share in Auto
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%.

Performance summary
  • For 2QFY17, net sales grew by 15.6% YoY on the back of strong volume and realization growth. Over all volumes for the quarter grew at 11.5% YoY and realizations were up by 3.6%.
  • The utility vehicles grew by 15.6% YoY. This was on the back of high sales for the Hybrid version of Scorpio and the XUV. Further, the company has also announced some new products and revamp of the existing products for the utility segment.
  • The tractors show a good rebound, growing at 36.9% YoY. This was on the back of the revival in the rural areas. M&M is a market leader with market share of around 43%.
  • Exports for the quarter grew by 13.3%.
  • On a segmental basis, farm equipment business grew by 24% YoY and the automotive business grew by 12%. Further, the share of farm equipment business has increased to 34% against 32% in 2QFY16.
  • Adjusted operating profits for the quarters increased by 19.6% YoY with margins expanding by 45bps to 13.5%. The company received IPS benefits on commissioning of phase I of the Chakan plant during 2QFY17. This included one-time benefits of Rs 1 bn for previous years till 1QFY17.
  • Adjusted net profits grew by 18.5% YoY with margins expanding by 28bps to 11.3%. The increase in the net profit was backed by the robust growth in the other income (up 41.3% YoY)
  • During the first half of the financial year 2016-17 (1HFY17), top-line grew by 13.4% YoY and net profits grew by 17.3%.

    Financial performance: M&M and MVML** combined
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net sales 88,019 101,718 15.6% 182,489 206,965 13.4%
    Expenditure 76,574 88,036 15.0% 157,594 178,397 13.2%
    Operating profit (EBDITA) 11,445 13,682 19.6% 24,895 28,567 14.8%
    EBDITA margin (%) 13.0% 13.5% 44.87 13.6% 13.8% 16.12
    Other income 4,867 6,879 41.3% 5,977 8,174 36.8%
    Depreciation 2,711 3,701 36.5% 5,255 7,185 36.7%
    Interest 625 464 -25.8% 1,187 892 -24.9%
    Profit before tax 12,975 16,396 26.4% 24,429 28,665 17.3%
    Exceptional item 0 0 0 910
    Tax 3,245 4,867 50.0% 6,401 8,430 31.7%
    Profit after tax / (loss) 9,730 11,529 18.5% 18,028 21,145 17.3%
    Net profit margin (%) 11.1% 11.3% 28.01 9.9% 10.2%
    No. of shares (m) 621.1
    Diluted earnings per share (Rs)* 15.7 18.6 55.3
    Price to earnings ratio (x)* 22.05

    (*Trailing twelve-month earnings)
    (**Mahindra Vehicle Manufacturers Ltd)

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Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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