The auto major reported a massive 39.6 percent YoY growth in profit to Rs 530 crore for the quarter ended December 2020. Revenue from operations grew by 16 percent YoY to Rs 14,056.5 crore in Q3 FY21 with strong tractor volumes.
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Mahindra and Mahindra (M&M) share price jumped over 9 percent in the morning session on February 8. The auto major reported a massive 39.6 percent year-on-year growth in profit at Rs 530 crore for the quarter ended December 2020.
The company had an exceptional loss of Rs 1,213.98 crore for the December quarter, representing impairment provisions for certain long-term assets and other exposures. The profit before exceptional loss stood at Rs 1,745 crore for the quarter.
Revenue from operations grew by 16 percent year-on-year to Rs 14,056.5 crore in Q3 FY21 with strong tractor volumes.
The company sold 97,420 tractors in the domestic market in Q3 FY21, registering a 20 percent growth over the corresponding period on robust rural story but automotive business sales fell 7 percent to 1,15,272 vehicles as some significant challenges do exist, especially on the supply side and commodity prices, M&M said.
Numbers were better than analysts’ expectations. Profit (before exceptional loss) estimated at Rs 1,538 crore on revenue of Rs 13,754 crore for December quarter 2020, according to the average of estimates of analysts polled by CNBC-TV18.
At the operating level, its earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 33.4 percent to Rs 2,385.6 crore and margin expanded 220 bps to 17 percent compared to the corresponding quarter, driven by cost optimisation and operating leverage, which both were also above CNBC-TV18 poll estimates of Rs 2,263 crore and 16.4 percent respectively.
Tractor business registered a 23.5 percent year-on-year growth in revenue at Rs 5,281 crore with its EBIT climbing 49 percent and margin rising 390 bps YoY.
“Growth momentum for the tractor industry was supported by positive sentiment in rural parts of the country, specifically the agri economy which is driven by (i) Very good monsoon (ii) Healthy reservoir levels (iii) record kharif production (iv) good rabi sowing (v) Continued high central government spending in agriculture and rural development,” said the company.
The stock was trading at Rs 946.45, up Rs 80.85, or 9.34 percent. It has touched a 52-week high of Rs 952.15. It has touched an intraday high of Rs 952.15 and an intraday low of Rs 888.
Global research firm Goldman Sachs has maintained a buy rating on the stock with a target of Rs 1,029 per share. It is of the view that Q3 earnings were above estimates and auto is geared for recovery adding that beat continued on the consolidated front as well, according to a CNBC-TV18 report.
“M&M remains our preferred pick in the passenger vehicle and commercial vehicle space.
Japanese research firm Nomura has also retained buy on the stock with a target of Rs 1165 per share. It believes that the company is executing well on all fronts. The success of new SUV, LCV share gains and efficient capital allocation is likely to drive re-rating. The brokerage firm has raised EPS estimate by 14 percent/ 2 percent/ 8 percent for FY21/FY22/FY23.
Mahindra & Mahindra on February 6 said it is considering another increase in price across products in the first quarter of the next fiscal to counter the spike in the input costs. The company had raised prices of its entire range by nearly 2 percent in January.
“We have just taken some price increase in January and unless things come under control we would probably be taking one again in Q1 of the next financial year,” Mahindra & Mahindra (M&M) Executive Director Automotive & Farm Sectors Rajesh Jejurikar said.
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