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M&M to post better margins on robust tractor sales Jul-Sep, but lower profit

Demand in India’s hinterlands have started to revive following bountiful monsoon rains, boosting sales of tractors and sport-utility vehicles made by Mahindra. Photo: Mint
Demand in India’s hinterlands have started to revive following bountiful monsoon rains, boosting sales of tractors and sport-utility vehicles made by Mahindra. Photo: Mint

  • Riding on strong demand for tractors in the domestic market, M&M had sold 90,327 units in the September quarter, up 31% YoY. On the other hand, the company’s overall vehicle sales declined 23% YoY during the three months

Mumbai: Mahindra and Mahindra Ltd (M&M), which will report its Q2 earnings today, is expected to post improved operating margins on a sharp year-on-year growth seen in tractor sales during the September quarter.

According to Emkay Global Financial Services Ltd, the revenues are expected to increase 3% YoY to 11,297 crore and the Ebidta (earnings before interest, taxes, depreciation and amortization) margins to improve 71 basis points to 14.8%.

“Automotive realization is expected to increase due to higher share of passenger and commercial vehicles, BS6 launches and the price hikes. The Ebidta margin is expected to increase due to higher scale," the brokerage said in a preview report.

However, Emkay expects a 20% YoY decline in profit to 1,078 crore for the September quarter on lower vehicle sales and lower dividends from subsidiaries.

Riding on strong demand for tractors in the domestic market, M&M had sold 90,327 units in the September quarter, up 31% YoY. On the other hand, the company’s overall vehicle sales (including passenger and commercial vehicles – PVs and CVs) declined 23% YoY during the 3 month period. It sold 39,533 PVs and 47,309 CVs in Q2FY21, down 12% YoY and 4.5% YoY respectively.

ICICI Securities expects a decline of 7% in September quarter profit at 1,255 crore.

“We expect margin expansion of ~127bps YoY to 15.4% due to higher share of tractor segment and strong pick-up in utility vehicle sales aided by lower other expenses (down 44bps) and employee costs (down 30bps)," the brokerage said.

M&M’s revenue in Q1FY21 was at 5,589 crore, down 56% YoY and profit was at 68 crore, down 97% on a quarter, marred by covid-19 induced lockdown. The company’s consolidated Q2FY20 revenue was at 10,935 crore, down 15% YoY on lower vehicle and tractor sales. The profit after tax was at 1,355 crore, down 24% YoY, in Q2FY20.

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