 "Mahindra's net declines 2.3%")
Revenue of M&M and MVNL declined three per cent year-on-year to Rs 8,794 crore during the quarter, even as volumes declined 10 per cent y-o-y. Deficit rains adversely impacted the rural incomes and rural sentiment, leading to a fourth straight quarter of de-growth for the tractor industry, the company said. The going may not be any better during the remaining six months of 2015-16.
"Given the monsoon, we do not maintain a positive stance on tractors and we expect the industry to de-grow by five per cent for the full year. The utility vehicle (UV) segment may end up growing positively by one-two per cent compared with de-growth witnessed in the first six months," executive director Pawan Goenka said during an analyst call. "The monsoon was the biggest spoiler. Tractor de-growth we had during the quarter was 24 per cent. Passenger vehicle was positive but for cars the utility vehicle (UV) segment degrew," Goenka added.
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Despite the decline in revenues and volumes, the company managed to stem a fall in profitability by improving realisations and keeping a tight control on costs. M&M's shares did not react negatively as the net profit at the standalone level was marginally ahead of the Street's estimates, even though volumes and sales continued to decline. A poll by Bloomberg had forecast a stand-alone net profit of Rs 911 crore.
TUV3OO, M&M's latest launch in the passenger vehicle space, has seen a robust pick-up in demand. It has an order backlog of 12,000 units and has already delivered 8,800 units.
"We are making 5000 units of the TUV3OO presently. We will ramp up production only when we will add exports. We are also going to launch S101 (compact SUV) before end of the year with a 1.2 litre petrol and diesel engines," added Goenka.
The operating margin expanded 100 basis points year-on-year to 13.2 per cent during the quarter, as realisations improved. Realisation in the automotive segment grew seven per cent due to better mix, while realisation in the farm segment grew 14 per cent. Analysts believe the jump in realisation in the farm segment was possibly due to sale of higher horse power tractors during the quarter. The company has taken a marginal price hike in the UV portfolio.
Nitesh Sharma of Phillip Capital said: "M&M along with MVML managed to beat estimates, which was primarily driven by strong cost controls, lower discounts in FES and benefits from lower raw material prices. The near-term outlook remains weak with our recent channel checks suggesting continued strain in tractor sales despite a low base."
Even as the domestic market continued to show signs of stress, exports grew at a healthy pace. The company reported an export growth of 45 per cent in UVs at 10,230 units, against 7,053 units. It reported a pick-up in medium and heavy commercial vehicle volumes, growth in volumes for the XUV5OO.
M&M sold 45,228 UVs in the domestic market during the quarter with a market share of 33 per cent. In the entire automotive segment, the company clocked sales of 113,132 units a dip of two per cent, against 115,675 units sold in the same period last year. In tractors, the company sold 42,268 units with a market share of nearly 40 per cent but a fall of 24 per cent in volumes. Company officials expect a five per cent de-growth in industry-wide sales. The company also received dividend income of Rs 485 crore during the quarter, against a similar amount last year same quarter.
"Festive season so far has been very good. The October billing was 20 per cent higher for us and industry and all segments have grown. If the retail is looked at it is looking very positive," added Goenka.