For M&M, tractor sales have troughed out

The first half of the fiscal may have subdued tractor sales (down 4.5% on-year), but market leader Mahindra & Mahindra (M&M) is confident of a segment-wide revival in the second half.

Overall sales in the high-margin tractor segment grew 18% in November and M&M’s, at 19,757 units, grew 22%, up from 16,175 units in November last year.
“We’ve grown better than the industry. Things are taking a turn for the better for the industry now,” said Sanjeev Goyle, senior vice-president of marketing and Applitrac at M&M. “Even if there is a growth of 5-6% in the second half, by and large, the industry will end with a flat on-year growth. This is better than a decline in growth.”

Analysts feel M&M’s sales have bottomed as its sales grew 22% during November. Segment-wide “sales have been supported by the late revival in monsoons as well as a benign base. The (M&M) management has reiterated its growth guidance of 0-2% for FY13E, which implies that sales will rise over H2”, said Aditya Makharia and Ritesh Gupta, analysts with JP Morgan, in a note last week.

“The growth (in November) is also because of the low base effect. The industry started slowing down from the end of last calendar year. Hence, a jump in growth. However, sales of tractors used for other applications have still not picked up, so we will still be cautious,” said Yaresh Kothari, analyst with Angel Broking.