Homegrown auto major Mahindra & Mahindra has reported 14.13% decline in standalone net profit to Rs 807.99 crore for the third quarter ended December 31, hit by weak sales in the tractor segment.
Homegrown auto major Mahindra & Mahindra has reported 14.13% decline in standalone net profit to Rs 807.99 crore for the third quarter ended December 31, hit by weak sales in the tractor segment.
The company had posted a net profit of Rs 942.14 crore in the corresponding period of the previous fiscal, Mahindra & Mahindra said in a regulatory filing.
However, net sales during the period under review stood at Rs 10,900.39 crore as against Rs 9,310.41 crore in the year-ago quarter, up 17.1%.
In the third quarter, Mahindra & Mahindra along with its wholly-owned arm Mahindra Vehicle Manufacturers Ltd (MVML) sold 58,660 utility vehicles while tractor sales stood at 59,883 units in the domestic market, the company said.
"The tractor market remained subdued with a degrowth of 1.5% in the current quarter on account of lower kharif output and a lower Rabi sowing than last year which impacted the income and the sentiments of the farming community," it added.
On outlook, the company said: "With the macro policy environment now turning more supportive and El Nino conditions, along with its adverse impacts on agricultural output and incomes set to dissipate, domestic consumer demand is likely to gain strength in the coming years." Mahindra shares were trading at Rs 1,100 on BSE, down 2.31% from the previous close.
Commenting on the results, Bharat Gianani, senior research analyst, automobile, Angel Broking said, "M&M 3QFY2016 numbers were below estimates given the lower-than-estimated margins in the tractor segment and higher depreciation charge. For (M&M+MVML), revenues grew 15% YoY to Rs10,466 crore, slightly lower than our estimate of Rs 10,964 crore.
Overall volumes grew 12% YoY led by the automotive segment which grew 15% YoY led by new launches in the utility vehicle segment and recovery in LCV industry. Tractor volumes continued to remain sluggish reporting 5% growth during the quarter. Blended realization per vehicle grew marginally 3% YoY led by price hikes. Operating margins at 13.5% were lower than our estimates of 14.3%.
While the automotive EBIT margin at 10.2% was slightly better than our estimates of 9.8%, the tractor EBIT margins at 15.3% were below our estimates 17%. Adverse product mix and higher discounting could have resulted in tractor margins coming lower than expectations. Higher depreciation expenses of Rs 333 crore (up 26%) further impacted profitability. Net Profit at INR 821cr was lower than our estimates of Rs 989 crore. We would review our estimates post management interaction.”
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