What to expect from Mahindra & Mahindra Q4 results

MUMBAI: India’s, one of the largest manufacturers of tractors and utility vehicles, Mahindra & Mahindra Ltd (M&M) is expected to report a sharp year-on-year decline in its March quarter profit and revenue on the back of steep fall in domestic sales of passenger and commercial vehicles.

The company, which was already grappling with a demand slowdown, faced issues over procurement of parts from China in February due to the coronavirus outbreak. The problem was aggravated by the nationwide lockdown which was imposed in the last week of March to contain the spread of the pandemic in India.

M&M, which will report its earning today, sold only 34,113 passenger vehicles during the March quarter, down 56% from the year-ago period, according to the Society of Indian Automobile Manufacturers or Siam data. The company sold 41,028 commercial vehicles during Q4, down 40% YoY.

However, M&M’s farm equipment segment, which is a more profitable business segment for the company when compared to the vehicle business, fared better in terms of tractor wholesales on the back of stronger rural economy. The company sold 59,290 tractors during the March quarter, down only 2.6% yoy from the year-ago period.

The company, in a disclosure to the BSE on 3 June, had said the pandemic-induced lockdown has led to an estimated sales loss of 23,400 vehicles and 14,700 tractors in March alone. It said all manufacturing facilities and offices were shut from 25 March.

“The profitability of the company for the quarter and financial year ended March 31, 2020 will definitely be impacted,” M&M said in a statement last week.

Motilal Oswal Financial Services Ltd said volumes decline will adversely affect M&M’s margins and the company’s domestic passenger and utility vehicle market share continues to erode due to stiff competition. The brokerage estimates M&M’s Q4 net operating income to decline 38% yoy with Ebidta (earnings before interest, taxes, depreciation and amortization) margin of 11.4%, lowest in the last eight quarters.

According to Edelweiss Financial Services Ltd, the performance of tractors would be more critical as it is a high cash generating business and could lend support to overall business.

While Motilal Oswal Financial estimates M&M’s FY20 Ebidta margin at 13.7%, Edelweiss expects it to be at 12.4%.

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[Source: live Mint]

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