Thus far in the month of January, M&M underperformed the market by falling 15 per cent after the company reported disappointing sales numbers of farm equipment sector for December 2018 due to tight liquidity and low buying sentiment.
The company said it has sold 17,404 units of tractors in December, down 6 per cent as compared to 18,488 units sold in the same month last year. The company’s total sales on the automotive business front remained flat with 39,755 units sold in December buoyed by strong performance in exports. It had sold 39,200 units sold in the same month of the previous year.
As for the automotive division, the management has said that liquidity challenges and low consumer sentiment have impacted the sales in December. Going forward, the company expects to see a better Q4 on account of anticipated rural demand because of the harvesting season and launch of their XUV300 in Feb’19. For tractors, the management has said that while Rabi sowing has been lower, the government's initiatives in the agri and rural sectors would enable tractor sales momentum in Q4FY19.
Meanwhile, Reliance Securities expects lower UV sales and falling M&HCV volume would drag the M&M’s margin in the October-December quarter (Q3FY19).
“M&M’s overall volumes for the quarter were higher 11.3 per cent year-on-year (YoY), where tractors were up 11.6 per cent YoY (automotive volumes too were up 11 per cent), forming 38.8 per cent of total volumes (v/s 38.7 per cent in Q3FY18 & 34.1 per cent in Q2FY19) . Resultantly, we expect M&M’s standalone revenues to increase around 20 per cent YoY but EBITDA margin to be at 12.3 per cent, lower 60bps YoY / 10bps QoQ on account of commodity costs pressures,” Prabhudas Lilladher said in an earnings preview.