Strong tractor and UV sales drive up M&M's Q1 net 23-fold

Earnings, however, aren't strictly comparable due to last year's low base. Businesses had come to a halt in the June quarter of 2020 due to Covid-19-induced national lockdown

Robust sales of tractors and automobiles coupled with last year’s low base bumped up the net profit (standalone) of Mahindra & Mahindra (M&M) for the quarter ended June, the company said on Friday. The earnings were broadly in line with analysts’ estimates.
 
The Mumbai-headquartered firm reported a 23 times year-on-year (YoY) jump in net profit at Rs 934 crore for the quarter ended June. Earnings, however, are not strictly comparable owing to last year’s low base. Businesses had come to a halt in the June quarter of 2020 due to the Covid-induced national lockdown.
 
Revenue from operations at the combined entity jumped 110 per cent YoY to Rs 11,763 crore. However, it was lower than the revenue of Rs 13,338.15 crore it reported in Q4 of last financial year. 
 
“The company’s performance is not strictly comparable on QoQ (quarter-on-quarter) and YoY basis as it has restated its base quarter numbers pursuant to absorption of MVML (Mahindra Vehicle Manufacturing) into M&M,” said a research note by ICICI Securities. 
 
Standalone profit after tax (PAT) for the quarter came in at Rs 856 crore against the expectation of Rs 768 crore. This was due to higher-than-expected margins despite lower-than-expected other income, said the research note.
 
While tractor sales more than tripled to 85,858 units from 26,619 units, dispatches of passenger vehicles increased by 52 per cent to 99,127 units from 65,1195 units in the year-ago quarter. 
 
The company’s farm equipment sector, its cash-cow, reported the highest-ever operating profit of Rs 1,081 crore for the June quarter while revenues stood at Rs 5,319 crore.
 
“Our focus on operational efficiency and financial discipline gives us the confidence that our core performance will continue,” said Anish Shah, managing director (MD) & chief executive officer (CEO), M&M.
 
The group’s sharp focus on capital allocation has paid off, he said, pointing out that the group is through with the exercise of exiting non-core and underperforming businesses.
 
After announcing its complete exit from Ssangyong Motor, M&M exited the dairy business and restructured the farm equipment business in Eastern Europe.
 
Commenting on the impact of chip shortage on the auto business, Rajesh Jejurikar, executive director – auto and farm equipment sectors – at M&M said auto volumes could have been higher by 25 per cent but for the shortage of semiconductors. “There is a demand-supply mismatch of at least 25 per cent,” he added.