India’s largest tractor manufacturer and one of the leading players in the utility vehicle segment, Mahindra & Mahindra (M&M) is expected to report a year-on-year decline in its revenue for April-June of the current fiscal due to declining sales across passenger and commercial vehicles, as well as tractors.

The company’s domestic wholesale volumes declined across vehicle categories during Q1FY20. According to data released by Society of Indian Automobile Manufacturers (Siam), M&M dispatched 59,399 units of passenger vehicles in Q1, which marked a year-on-year decline of 2%. In the commercial vehicle segment, it reported a drop of more than 9% YoY with volumes at 51,594 units during the three-month period. For three-wheelers (excluding electric vehicles), the company reported domestic wholesales of 12,697 units, down 2.37% YoY.

Quarterly wholesales for M&M’s farm equipment sector were in line with the downward trend. It reported total domestic sales of 82,913 tractors for the quarter ending June, down 15% YoY. Tractor exports, on the other hand, were flat.

According to Motilal Oswal Securities, M&M’s Q1FY20 net revenue is expected to decline 7% YoY and about 10% QoQ to 124.5 billion. The profit after tax (PAT), which had declined 20% in the fourth quarter of last fiscal, is expected to decline again by 20% YoY and EBIDTA margin is expected to shrink 150bp YoY to 14.3%, suggested the broking firm.

ICICI Securities expects M&M’s EBIDTA margin to decline 208bps YoY to 13.7% on account of lower production volumes, higher variable marketing expenses, and poorer product mix. The company’s outlook for growth and margin guidance in utility vehicles and tractor volumes along with updates on responses to newly launched products such as XUV300 and Marazzo remain the key factors to watch out for today.

The company had earlier said it plans to invest 18,000 crore over the next three years, including 12,000 crore for capex and 6,000 crore in subsidiaries. M&M, which is ready with its BSVI compliant engines and is working on its production plans for this year, is not expected to launch any new major product in FY20. The company, however, has plans to begin rolling out new products in FY21.

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