M&M Q1 profit surges 63% on rural recovery, low base
MUMBAI: Mahindra and Mahindra Ltd topped street expectations with an increase of 63% in stand-alone quarterly net profit supported by a low base effect. It also recorded higher tractor sales following a revival in rural demand during the quarter.
The company’s net profit in the three months ended June 30 was at ₹1,220.96 crore, from ₹749.46 crore in the corresponding quarter of last year, and surpassing the ₹1,176.70 crore forecast in a Bloomberg survey of analysts.
Demand in India’s hinterlands have started to revive following bountiful monsoon rains, boosting sales of tractors and sport-utility vehicles made by Mahindra. Volumes in the automotive segment climbed 20% last quarter to 139,844 units, while in the farm equipment segment, it grew 18% to 99,897 units.
Consequently, Mahindra’s stand-alone revenue increased 16% from the year earlier to ₹13,519.91 crore during the April to June period.
Revenue from the automotive sector increased 5.8% to ₹8,188.13 crore, while it grew 16% in the farm equipment sector to ₹5,006.88 crore.
Standalone revenue was marginally lower than Bloomberg’s forecast of ₹13,542.30 crore.
“The demand for both automobiles and tractors was driven by positive sentiment in the economy (both urban and rural) due to a third consecutive year of a normal monsoon, sustained investment in road & infra projects and availability of affordable finance. However, for the automotive industry, the exceptionally high growth numbers are due to the low base effect,” the company said in a statement.
Mahindra’s standalone earnings before interest, tax depreciation and amortisation or Ebitda surged 52% to ₹1,892.51 crore in the previous year. This despite the auto maker experiencing overall increase in expenses mainly due to higher raw material costs.
“The monsoon this year has been very good and as of now it has been 97% normal. So that’s great news for the industry. Also, oil prices has been over $70 per barrel and the industry has managed it well and overall that has not made an impact on the industry in the first quarter earnings.
The tractor industry grew at a rapid pace of 43% in the quarter which is much more that what we have expected,” said Pawan Goenka, managing director of Mahindra & Mahindra.
On a consolidated basis (M&M and MVNL), the company posted 23% on-year increase in net sales to ₹13,358 crore, while Ebitda jumped 47% to ₹2,110 crore and margins expanded 260 basis points to 15.8%.
Consolidated net profit grew 67% to ₹1,257 crore.