M&M Expected Better Margin Improvement in FY17
In the September quarter better than expected operational performance driven by strong volumes in farm equipment segment as well as double-digit growth in the auto segment reported by Mahindra & Mahindra.
A 36% jump in tractor volumes. Over the year ago quarter, sales were marginally below expectations, it managed to report an operating profit growth of 28.3% to Rs 1,468 crore and margins at 14.4%, up 140 basis points.
The higher profitability was on account of better product mix, economies of scale and ongoing cost reengineering efforts. Aided by a strong operational show, its net profit was up 28.8% as well as other income which went up 41%. This was largely from dividends with incremental increase coming due to Tech Mahindra.
Due to the loss of fiscal incentives at various plants such as Haridwar, the tax outgo has also increased by half to Rs 486 crore.
The company expects its rural portfolio which includes both the tractors as well as UVs such Bolero, Scorpio as well pick-ups to do well, given the strong Kharif season as well as good trends of the Rabi season. From 15 per cent to 20%, it has increased its industry guidance for tractors.
At 37%, given that M&M grew its tractor volumes and it has gained market share which is now pegged 42.6%, its highest ever.
It could translate to more market share gains going ahead since the increase in the tractor guidance and it’s faster than industry growth. M&M's margins could increase going ahead in the second half of FY17 with a higher proportion of tractor sales expected.
Source : http://www.business-standard.com/