Trac­tors to Give M&M the Trac­tion in Medium Term

Co’s line-up of new trac­tors and global for­ays is ex­pected to off­set the muted growth in pas­sen­ger car seg­ment

The Economic Times - - Smart -

M&M’s US op­er­a­tion touched nearly $500 mil­lion in rev­enue in FY17 with 10% mar­ket share in the more than 80 HP trac­tors in the US.

An­a­lysts ex­pect muted growth in the com­pany’s au­to­mo­biles seg­ment, which ac­counts for over half of the to­tal rev­enue. The launch of new MPV (multi-pur­pose ve­hi­cle) in the sec­ond half of FY18 and re­fresh­ing of sev­eral ex­ist­ing models may help in ar­rest­ing the drop in vol­umes. The Street ex­pected 4-5% vol­ume growth in the au­to­mo­tive seg­ment for the cur­rent fis­cal.

On the fi­nan­cial side, the head­line fig­ures for the June 2017 quar­ter may not look im­pres­sive. How­ever, af­ter ad­just­ing for non-re­cur­ring ex­penses, the pic­ture is en­cour­ag­ing. The ad­justed op­er­at­ing profit rose by 7% to ₹ 1,600 crore, sig­nif­i­cantly bet­ter than the street’s ex­pec­ta­tion de­spite higher raw ma­te­rial cost. In ad­di­tion, the com­pany was able to re­duce the loss in the twowheeler op­er­a­tions which was a con­cern for in­vestors. The seg­ment loss is likely to fall to ₹ 100 crore in FY18 from ₹ 500 crore in FY17.

The stock trades at 14 times its pro­jected core auto op­er­a­tions (ex­clud­ing in­vest­ments in hos­pi­tal­ity and other ven­tures), which ap­pears rea­son­able since most other auto stocks com­mand price-earn­ings ra­tio of 18-30.

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