Tractors to give M&M domestic as well as global traction
Mahindra & Mahindra (M&M) getting help from good monsoon so far and reasonable stock valuation should to attract investors.
In the medium term, the tractors division is expected to drive the company's earnings growth notwithstanding the sluggish momentum in passenger vehicles segment.
In the June 2017 quarter, the company's tractor volumes grew by 13 per cent, much better than the 8% growth for the industry due to new launches including Yuvo and Nuvo.
The company's management retained its guidance of 10-12 per cent growth for the tractor industry during an analyst conference call after the June 2017 quarter results.
Since the full impact of newly launched 24 HP Jivo tractor -mainly used in horticulture operations, M&M tractors' volume is likely to exceed and will reflect in the remaining months of the fiscal.
Also, under Swaraj brand, it will launch a new tractor. In M&M's tractor volume for FY18, analysts expect 15-17 per cent growth.
Apart from domestic traction, the global market, also offers growth opportunities. In the next few years, the company plans to expand farm equipment business globally, taking the share of this segment in the consolidated revenue to 50 per cent in three years from the current 35 per cent.
In FY17 with 10 per cent market share in the more than 80 HP tractors in the US, M&M's US operation touched nearly $500 million in revenue. The company's recent acquisition of a stake in Mitsubishi Agriculture Machinery, Sampo in Finland and Hisarlar in Turkey, will help increase its market size and presence globally.