M&M Continues To Outperform In Q4FY13

M&M has been a consistent outperformer in the Indian automobile industry. Even with a subdued environment prevailing since the beginning of FY13, M&M, through its robust product portfolio and strong presence in the segments that are doing well, has been growing well, and consistently. It displayed the same trend in its Q4FY13 results that it announced on May 30, 2013.

In Q4FY13, volumes of M&M remained robust in the passenger vehicle segment. Utility vehicle sales in India have been growing and M&M’s position as the market leader helped it perform well. Sales volume increased by 23% YoY to 72076 units. At end of Q4FY13, it had a 47.8% market share in the utility vehicles segment.

M&M’s performance in the tractor segment remained subdued. Domestic tractor sales have been moderate through the year and M&M’s volumes declined by 5% in Q4FY13, over the previous year. However, its outperformance in the utility vehicles segment made up for this and boosted overall performance.

In Q4FY13, M&M’s revenues grew by 11.79% to Rs 10486.53 crore, as compared to Q4FY12. Its EBIT increased by 40.32% to Rs 1071.08 crore. This marks an improvement in the EBIT of 208 basis points to 10.21%.

Its net profit however grew by 1.68% to Rs 899.19 crore in Q4FY13. Its important to note that in Q4FY13, there were exceptional items worth Rs 90.62 crore that boosted profits. This was on account of the sale of 34 lakh shares in M&M’s subsidiary Mahindra Holidays and Resorts India.

Also, In Q4FY12, M&M benefited due to the merger of the automotive business of an M&M subsidiary - Mahindra Automotive Distributors. The past unabsorbed tax losses of the automotive business of this subsidiary became available to M&M and hence there was a one-time tax saving of Rs 148.5 crore during Q4FY12.

Overall, the result of M&M has been impressive, especially taking into consideration the industry dynamics at present. However, the outlook of the industry seems to be improving with a reversal in the trend in interest rates and inflation. Consumer sentiment is likely to improve over the coming months and is likely to benefit the industry as a whole. This would further boost the performance of M&M.

Moreover, the Indian Meteorological Department has forecasted a normal monsoon in FY14. If happens to be the case, there will be drastic improvement seen in the economy, leading to improved farm equipment sales and passenger vehicle sales.

In any case, our outlook on the prospects of M&M have been bullish on account of its past performance, diversification, product portfolio and strong fundamentals.