A Mahindra & Mahindra Ltd. Roxor off-road vehicle sits on display during the 2019 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S. (Photographer: Daniel Acker/Bloomberg)

Q3 Results: M&M Profit Beats Estimates Despite Narrower Margin

Mahindra & Mahindra Ltd.’s profit surpassed estimates even as higher input costs squeezed the automaker’s margin.

Net profit rose 7 percent year-on-year to Rs 1,396 crore in the October-December quarter, according to the automaker’s exchange filing. That’s higher than the Rs 988 crore estimated by analysts tracked by Bloomberg. The financials include numbers of its commercial vehicle unit—Mahindra Vehicle Manufacturers Ltd.

Revenue rose 12 percent to Rs 12,892 crore, also higher than the Rs 13,108 crore estimate.

But the company cautioned that “global expansion has weakened and risks to global growth have tilted to the downside”.

Escalation of trade tensions beyond those already anticipated and tightening of financial conditions are a key source of risk to the outlook. We must also remain watchful of potential triggers including a “no-deal” Brexit and a greater-than envisaged slowdown in China.
Mahindra & Mahindra Exchange Filing

Earnings before interest, tax, depreciation and amortisation rose 0.7 percent to Rs 1,690 crore. Ebitda margin contracted to 13.2 percent from 14.7 percent a year ago. The Bloomberg consensus estimate was 13.8 percent.

A joint report by DBS Bank and Emkay blamed higher input costs for an expected contraction in margins across the sector. Aggregate Ebitda margin for the auto sector is expected to decline on the back of “negative operating leverage, commodity inflation and increase in incentives/discounts”.

Shares of the automaker fell as much as 2.9 percent after the earnings announcement compared with a 2.83 percent decline in the Nifty Auto Index. Mahindra & Mahindra has fallen 8.21 percent over the last 12 months compared with a 25.33 percent decline in the auto benchmark, faring better than most of its peers.

Q3 Results: M&M Profit Beats Estimates Despite Narrower Margin