Rows of Mahindra & Mahindra Ltd. XUV 500 sport utility vehicles (SUV) are parked in a stock yard. (Photographer: Kuni Takahashi/Bloomberg) 

Q2 Results: M&M Profit Jumps 26%, Beats Estimates

Mahindra & Mahindra Ltd.’s profit rose in the July-September quarter, surpassing analyst estimates even as its operating margin contracted.

The maker of utility vehicles and tractors reported a net profit of Rs 1,779 crore for the three months ended September, an increase of 26 percent from the year-ago period, according to its stock exchange notification. That compares with Rs 1,325 crore that analysts surveyed by Bloomberg had forecast. The bottom line was aided by a one-time gain of Rs 137.5 crore. The financials include numbers of its commercial vehicle unit—Mahindra Vehicle Manufacturers Ltd.

Revenue rose 6 percent on a yearly basis to Rs 12,790 crore. This was in line with the Rs 12,700-crore estimate.

M&M sold 1.41 lakh units between July and September, an yearly increase of 9 percent even though its tractor sales declined 5 percent year-on-year to 73,012 units. The company’s exports rose 14 percent to 13,377 units.

“The company will maintain its 12-14 percent volume growth guidance in the tractor industry for the ongoing financial year,” Managing Director Pawan Goenka told reporters in a post-earnings press conference.

M&M’s operating income or the earnings before interest, tax, depreciation and amortisation fell 4 percent on a yearly basis to Rs 1,849 crore—the consensus estimate was Rs 1,850 crore. The company’s operating margin contracted to 14.5 percent during the period from 16 percent—analysts had forecast 14.6 percent.

“We were expecting a lower margin due to the slowdown in tractor volumes,” said Vineeta Sharma, head of research at Narnolia Financial Advisors.

Key Highlights From The Post-Earnings Press Meet

  • Expects moderate growth for trucks and the commercial vehicle segment for the second half of the current financial year.
  • Have not seen issues for retail auto loan disbursements coming from non-bank lenders.
  • Election will not have an adverse impact on demand.
  • To early to talk about starting manufacturing BS-VI vehicles.
  • Transition to BS-VI vehicles production challenging after revision of timelines by the Supreme Court.
  • Will pass on higher costs to consumers depending on market dynamics.

Shares of M&M fluctuated between gains and losses to trade 1.5 percent lower after the results were announcement. That compared with a 0.4 percent decline in the NSE Nifty Auto Index. The scrip finally closed at Rs 770.40 apiece, down 2.62 percent from its previous close on the BSE.