Mahindra & Mahindra post 22.2% increase in net profit despite challenging conditions
Mahindra & Mahindra, a market leader in the utility vehicle segment, came out strong by posting healthy sales and profit figures despite a very challenging economic climate
Mahindra & Mahindra (M&M), one of the largest utility vehicles manufacturers in India, reported strong standalone revenues growth of 33% year-on-year (y-o-y), to Rs9,812.96 crore on the back of good volume performance by the automotive sector. Its tight control on expenses saw its operating profit grow 27% y-o-y to Rs11,18.92 crore, while net profit grew 22.2% y-o-y from Rs737.38 crore to Rs901.80 crore. All figures are standalone. In an otherwise challenging industry and economic climate, the company has done well.
We referred to our Moneylife database to see whether this growth rate was abnormal or part of its long-term trend. We found out that its sales growth nearly was almost equal to its three-quarter y-o-y average growth rate of 37%, while its operating profit trumped its average three-quarter growth rate of 21%, underlying its success in reining in costs. Its return on networth stood at 26% while its valuation was in double digits, with market capitalisation 11.37 times its operating profit.
In the passenger utility vehicle (UV) segment, M&M sold 62,751 vehicles in the reporting quarter, up 32% from the amount it sold in the corresponding period last year. It launched the all-new compact and versatile sports utility vehicle (SUV) Quanto to strengthen its portfolio in the UV segment. Quanto generated 5,000 bookings in the first three weeks of its launch. The company enjoys its leadership position in the UV segment with a market share of 45.4%. In the cars segment, it sold 4,899 units of the Verito model. As a whole, the company exported 10,349 vehicles in the current quarter, which is 43% higher than what it sold last year. However, it fared poorly in the tractor segment, due to an erratic monsoon, with de-growth of 12% year-on-year, with 47,065 tractors sold. Its market share in this segment stood at 40.3%.
During the quarter, the company saw its foreign institutional investor (FII) holding increase from 27.58% to 30% and domestic institutional investor (DII) actually decrease by 1.37 percentage points to 18.60%. The promoter shareholding also declined, marginally, by 10 basis percentage points to 25.35%.
The company believes its long-term prospects remains intact despite inherent risks over the short-term in light of the Eurozone crisis and escalation of tensions in the Middle East. The company said in its statement, “The current economic situation is quite challenging. However, the company through its continuous focus on new product introduction, process innovation and cost control, expects to rise to this challenge adequately.”
The stock settled 3.59% higher at Rs857.55 on the Bombay Stock Exchange (BSE) today.