Auto maker Mahindra and Mahindra Ltd (M&M) surpassed expectations for the September quarter. Revenue from operations grew by around 36% over the year-ago period. This has come on the back of rising sales volumes, rationalization of prices and higher market share. According to the firm, the earlier onset of the festival season and easy access to rural credit were factors that drove sales.
The biggest surprise came from operating margins at around 18% compared with around 6% a year ago. Higher volumes which translated into lower unit costs, roll back of earlier discounts and relief on raw material costs contributed to expansion in operating margin. Operating profit consequently rose by 319% over the year-ago period and net profit jumped 241% to Rs703 crore.
An analyst pointed out that the excellent results may lead to a 10% upward revision in earnings estimates for 2009-10. It’s possible, though, that the second quarter could be the best for the fiscal. Input prices may harden by around 4% on a year-on-year basis in October-March.
On Thursday, the share shot up 4% to Rs825 in a weak market. The firm has already posted earnings per share of Rs40 for the first six months of the fiscal. On an annualized basis, the earnings are discounted around 10 times at the current price. Given M&M’s market share, the stock could see a rerating.
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