Mahindra Expected to Report Double Fiscal Q4 Net Profit Increase21

NEW DELHI: Mahindra and Mahindra, among the country’s leading automakers, are expected to report substantial growth in revenue and net income for the quarter ended March 31, thanks to a surge in demand for its tractors and a gradual takeover of commercial vehicle businesses. The operating margin is expected to improve with the higher share of tractors and higher product prices.

The company will report its fiscal fourth quarter (Q4) results later today.

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According to brokerage ICICI Securities, the Mumbai-based maker is expected to report a 250% increase in year-over-year net profit to Rs 1,129.3 crore due to a 39% jump in net sales to Rs 12,510.4 crore for the quarter under review.

Operating profit or earnings before interest, taxes, depreciation and amortization is expected to increase by 57.4% to Rs 1,932 crore while margins could increase by 181 basis points to 15.4% due to the strict measure cost reduction.

Analysts’ estimates, compiled by Bloomberg, suggest that Mahindra and Mahindra are expected to report net income of Rs1,094.7 crore (13 analysts) and operating income of Rs12,795.10 crore (10 analysts) for the fourth quarter.

High commodity costs and a shortage of components such as semiconductors could mar the recovery in the coming months. The second wave of the pandemic will also affect M & M’s business in the future, as infections have spread rapidly in rural India.

Growth in the fourth quarter was helped by the weak base in the corresponding period, when sales declined significantly in China due to the lockdown imposed to contain the spread of the pandemic. The operations in India also reported a substantial drop in sales due to the transition to BS-VI emission standards.

Since unlocking the economy began in May last year, M&M has seen a strong recovery in demand for its tractors due to a faster than expected recovery in rural areas. In its automotive sector, however, the company continues to face challenges due to the disruption of the supply chain network and increased competition in the sport utility vehicle segment.

“Overall automotive volumes grew 10% year-on-year, the tractor segment by 35% year-on-year and the automotive segment by 16% year-on-year. We expect a 181 basis points year on year margin improvement to 15.4% due to the mix advantage via the higher volume share of the tractor segment (43% vs. 39% in Q4FY20) to compensate the impact of raw material price increases. M&M is expected to report 2.5x PAT growth adjusted to 11.3 billion rupees, ”ICICI Securities analysts said.

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