M&M consolidated Q1 Net marginally up on muted sales

Homegrown auto major Mahindra & Mahindra (M&M) today reported a tepid 4.3 per cent rise in consolidated net income at Rs 896.4 crore for the three months to June, driven down by a disappointing performance by the core auto business and muted show by the tractor segment.
On a standalone basis, the numbers beat street estimate though net income was down 6 per cent at Rs 881.78 crore, as M&M's passenger car and light medium commercial vehicle, fared poorly during the first quarter ended June 30.
Had it not been for the cost control measures and lower commodity prices, which helped the company improve its margins to 14.3 per cent from 13.8, the numbers would have been still lower, M&M Group President and Executive Director Pawan Goenka told reporters.

He described the quarter gone-by as a difficult period not only for the company but for the entire segment. "For us at M&M, both our key automotive business as well as the tractor segment witnessed headwinds."
Consolidated sales, which includes M&M and Mahindra Vehicle Manufacturers, stood at Rs 10,823.3 crore, down from Rs 10,942.7 crore a year ago, as tractor sales de-grew a bit. Despite that the company increased its market by 80 bps to 42.2 per cent, which is the highest ever, Goenka said.
However, he lowered the tractor sales growth outlook to 5 per cent from the earlier 8 per cent for FY15. Pegging Group auto sales at 5-8 per cent, Goenka said he expects commercial vehicles sales to be flat.

On a standalone basis, sales declined marginally to Rs 10,597.07 crore in Q1 from Rs 10,607.27 crore, bringing down net profit to Rs 881.8 crore from Rs 937.9 crore a year ago.

Terming the numbers as above their estimates, Motilal Oswal Securities Vice-President (equities) Rahul Shah his forecast was Rs 733 crore against the actual number of Rs 882 crore. Similarly, operating margin was higher than estimates.
However, Shah noted that M&M's staple UV business continues to face pressure led by weak industry demand and higher competitive pressures. Similarly, recent hailstorms and delay in monsoons pose risks to tractor growth.

During the quarter, revenue from automotive segment stood at Rs 5,988.60 crore and that from farm equipment was Rs 3,932.85 crore. It was Rs 5,980.62 crore and Rs 3,899.52 crore respectively in the year-ago period, Group Chief Financial Officer VS Parathasarathy said.
"The domestic automotive industry is currently facing very challenging times. In the June quarter, in spite of the stiff competition, M&M sold 52,180 utility vehicles and continued its leadership with the market share of 40.5 per cent. We also exported 6,565 vehicles in the quarter under review, up 37 per cent," Goenka said.
He said the pick-up segment was the star performer for the company, which increased the market share to 76 per cent from 58 per cent a year ago.