Mahindra and Mahindra profit jumps 25 pct; here is the reason why


Mahindra and Mahindra (M & M) reported Friday an increase of 25% year-on-year in their independent net profit of Rs. 1,332 crore for the three months ended September 30, 2017. Net profit was higher than analysts’ estimates and was driven by impressive tractor sales during the quarter. Net sales for the country’s largest tractor manufacturer increased 14% to Rs 12,182.07 crore, while the operating margin expanded. The company reported an EBITDA of Rs 1,729.26 crore, an increase of 45.5%, while the EBITDA margin increased 310 basis points to 14.2%. Pawan Goenka, CEO, told analysts in a conference call: “Margins have increased due to a favorable model combination in the quarter and because we have passed the increases in commodity prices to customers through the increase in We also eliminated all inventory with a BS III (Bharat Stage 3) or a GST impact in the last quarter. ”
The company experienced a strong increase in domestic vehicle volumes, which grew 9% to 1.38 lakh, led by a smart increase in the utility vehicle segment with 61,516 units. The volumes in the segment of agricultural equipment, which are mainly tractors, increased by more than 31% to 80,967 units. Tractor sales rose due to near-normal monsoons, which helped boost rural sentiment, the company said. To move forward, it is likely that the normal monsoons and the increase in minimum support prices for kharif and rabi crops will maintain a positive rural sentiment.
Speaking at a previous earnings conference, Goenka had said: “We witnessed good sales of tractors, but we obtained moderate performance in the automotive segment in the quarter, and the environment in urban areas has been conducive to growth. , also, it has begun to improve.In the quarter, we saw a 24% growth in retail sales in rural areas. ”
Except for the LCV segment of more than 3.5 tons and three-wheeled vehicles, all other vehicle categories experienced an increase in volumes during the quarter. The strongest drop was in the three-wheeler segment, which was down by almost 12% to 13,611 units. LCV volumes greater than 3.5 tons decreased 1.5% to 1,540 units. Goenka said there are no signs of moderate demand. “During the rest of the year, we do not see any headwinds and it is likely that our volume growth will continue, we also have a solid product launch line in the production line in the agricultural equipment space. a new SUV with code name U321 “.
In the electric vehicle business, Goenka said: “The prices of electric vehicles are too high for personal use, but they are appropriate for commercial use.We see that electric vehicles are an important part of our finances in the next 2-3 years ”
In Q2FY18, the company sold the largest number of Scorpio vehicles since its launch in September 2017 and has strengthened the UV product portfolio.
The national automotive industry reported a growth of 13.3%, driven by a normal monsoon, a general positive feeling in urban and rural areas and in the festive season. The passenger vehicle segment of the industry grew 13.4%, the UV segment grew 27% and the MHCV goods segment grew 30.6%. The board of directors of M & M recommended the issuance of bonus shares in the proportion of 1: 1, that is, a bonus share of 5 rupees each for each fully paid share of 5 rupees each, subject to approvals necessary. Friday’s writing closed with a rise of 2.34% to Rs 1,393.40 in the BSE.