The company’s reported net profit during the quarter was impacted by Rs 600 crore due to the provisions made towards impairment of certain investments. Its consolidated revenues declined 6 per cent at Rs 12,120 crore on YoY basis. Operating margin improved to 14.8 per cent from 13.2 per cent in the corresponding quarter of previous fiscal.
The management said the unseasonal rains in the month of October 2019 did some damage to the Kharif crop, but the sentiment in the agri and rural economy is fairly upbeat with good sowing of Rabi crops supported by very good water reservoir levels and government announcement for thrust on infra projects.
“In our view, M&M is well placed to further increase its market share in the domestic tractor segment as industry outlook has turned positive for FY21e with signs of South and West market leading the recovery. Although automotive segment has yet not regained their past mojo, sharp inventory clearance and a planned approach towards BSVI transition has reduced sharp discounting fears in Q4 (January-March),” analysts at Antique Stock Broking said.
M&M’s earnings before interest, tax, depreciation, and amortisation (Ebitda) margin surprise came in due to lower-than-estimated other expenses (at a 10-quarter low) while gross margins contracted quarter on quarter as we had expected. The consolidated automotive EBIT margin contracted 3.8 per cent; lower than -3 per cent in Q2FY20, owing to expansion of losses at Ssangyong, analysts at Elara Capital said.
The utility vehicle segment would face market share pressures in FY21, owing to heightened competition, in our view. The tractor segment has seen some green shoots in the past three months, the brokerage firm said with ‘buy’ rating on the stock.
In the past two days, M&M's stock plunged 8 per cent, after SsangYong Motor Co. on Friday said its net losses widened in the fourth quarter from a year earlier due to lower demand. M&M owns a 74.65 per cent stake in SsangYong Motor.