Mahindra & Mahindra (M&M) today announced its Q1 FY2019 results and they indicate the company is well positioned to drive speedy growth in FY2019. In the first quarter (April-June 2018) M&M and Mahindra Vehicle Manufacturers (MVML) reported their highest net revenue of Rs 13,357 crore, up 22.8 percent YoY.
During Q1, the company sold a total of 130,484 vehicles (+16%), 96,527 tractors (+19%) and exported 12,730 units (vehicles and tractors) a growth of 59 percent. In terms of financial performance, the first quarter saw M&M’s Profit After Tax rise sharply by 67 percent to Rs 1,257 crore; the operating margin was 15.8 percent compared to 13.2 percent for the same period last year. Interestingly, the Mahindra Farm Equipment Sector crossed the Rs 5,000 crore revenue mark and PBT crossed the Rs 1,000 crore mark. The company says it has achieved its best-ever first quarter performance across all financial parameters.
During the same period, the Indian auto industry grew 28.4 percent with passenger vehicles growing by 19.9 percent and the commercial vehicle industry growing by 51.5 percent, while, the domestic tractor industry grew by 23.4 percent.
According to M&M, the demand for both automobiles and tractors is being driven by positive sentiment in the economy (both urban and rural) on the back of a third consecutive year of a normal monsoon, sustained investment in road and infra projects and availability of affordable finance. However, for the automotive industry, the exceptionally high growth numbers is due to a low base effect.
In Q1 FY2018, industry volumes for passenger vehicles have been on the lower side due to the slowdown in demand preceding the implementation of GST in July 2017 and commercial vehicle volumes being adversely impacted due to supply constraints arising from implementation of BS IV norms. In the commercial vehicle space, the company reported its HCV volume up 123.4 percent, which helped it garner a market share of 5.7 percent.
M&M expects rural and urban consumption to remain healthy. A normal monsoon, with a satisfactory temporal and spatial distribution, combined with the recently approved higher MSP for kharif crops should help support rural consumption further. Improving capacity utilisation and credit offtake too augur well for investment activity.
While the Reserve Bank of India’s GDP growth forecast for 2018-19 has been retained at 7.4 percent, the company expects growth to be more front-ended. M&M says while the global growth backdrop has remained buoyant so far, however the recently announced and anticipated tariff increases by the USA and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions. These actions, according to the company, could pose risks to global recovery and investments.
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