Mahindra and Mahindra: Q1FY15 Result Analysis

Mahindra & Mahindra (M&M) announced its financial results for the quarter ended June’14.The consolidated net profit of the company slightly decreased to Rs 961.8 crore in June’14 quarter as against Rs 968.3 crore in June’13 quarter (YoY).
 
The standalone net profit of M&M decreased to Rs 881.78 crore in June’14 quarter as against Rs 937.91 crore in June’13 quarter, down 5.98 %.( YoY). This was mainly due to increase in total expenses which were up by 3.64% YoY to Rs 9240.38 crore in June’14 quarter as against Rs 8915.71 crore in June’13 quarter. The increase in expenses can be attributed to increase in cost of raw material consumed, employee benefits expenses and other expenses which rose 2%, 16.96 % and 11.62% respectively (YoY).
 
The company sold a total number of 33047 vehicles in month of July’14 as against 34490 vehicles sold in month of July’13, down 4.18% (YoY). Of these vehicles sold; a total number of 2520 vehicles in month of July’14 were exported as compared to 2606 vehicles in month of July’13. The company sold 36207 vehicles in June’14 and 35499 vehicles in May’14.
 
Mahindra Trucks and Buses; the trucks business of the company has been demerged from the subsidiary and has been merged with M&M. In the 68th Annual general meeting held on 9th August 2014, the company has declared a dividend of Rs 14 per share.
 
Coming to the segment wise performance, the sales of the automotive segment were up to Rs 6326.84 crore in June’14 quarter as against Rs 6120.54 in June’13 quarter. However, it was down from March’14 quarter and stood at Rs 7812.04 crore. The farm equipment segment reported revenue of Rs 3932.85 crore in June’14 quarter as compared to Rs 3899.52 crore in June’13 quarter. But, as compared to the March’14 quarter, the sales were up from Rs 3187.88 crore.
 
M&M sold 16379 tractors during July’14 as compared to 18469 in same period last year. This was due to late arrival of monsoon which led to late sowing and negatively impacting farmer sentiment. The auto segment sold 35567 units in July’14 as compared to 37096 in July’13. This segment comprises of passenger vehicles, four-wheeler commercial vehicles and three-wheelers. The company sold 13659 two-wheelers during the month of July’14. The company’s cumulative sales of two-wheelers for April-July month stood at 61791 units.
 
According to the company, with the Index of Industrial Production (IIP) index, a measure of India’s manufacturing activity, showing some signs of positivity the company expects the economy to revive. The IIP rose to 4.7% in June’14 as compare to 3.4% in May’14 which is a positive sign indicating a pickup in manufacturing activity.
 
Furthermore, with the exports increasing in double digit figures, country’s trade balance remains well within control. However, the current geo-political conflicts could have an adverse impact. The company’s outlook on the economy remains cautious in the near term.