Mahindra and Mahindra reports a marginal growth

Published By : 11 Aug 2014 | Published By : QYRESEARCH

The positive growth of 50-basis points (bps) for Mahindra and Mahindra for the June quarter might not be a big reason celebrate, but it surely is worth a mention. This result when compared to its last year’s 8% lower sales and poor farm equipment sales, seems like a good one. The minor improvement in operating margin to 14.3% and 5% increase in operating profit does seem like a surprise.

The profitability is attributed to favorable product mix and steady raw material costs. Although the auto segment reported low sales figures, the profit margin was at 10.6%, up 65 bps year-on-year. The low vehicle sales were compensated by increase in realization per vehicle. The same trend was seen in the farm equipment segment where profits were driven by improved realization per vehicle.

The analysts at M&M’s management stated that discounts were not given to encourage sales. The operating margins did retrace to 12.4% as raw material savings were offset by higher expenses, and the merger of Mahindra Truck and Bus.

The forecasted growth for 2015 does not show much improvement the analysts have stated. The reason for this is subdued sales in the near term. 

For the farm equipment, the management has brought down growth expectations from 8% to 5% for the fiscal year 2015. The impact of monsoon on rise in sale of farm equipment if yet to seen.

Mahindra’s utility vehicles (UV) also stumbled in the month of July, despite a 53% year-on-year growth in the respective industry. M&M is planning to launch new compact UV products to boost sales in fiscal year 2016.
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