Mahindra & Mahindra (M&M) has posted an estimate-beating 9.7 per cent rise in net profit in the seasonally weak second quarter, aided largely by lower material costs.
For the quarter ended September 30, the automobile manufacturer has posted a standalone net profit of Rs 989.5 crore, compared with Rs 901.8 crore recorded in the corresponding quarter of the previous fiscal. However, net sales fell 8.74 per cent to Rs 8,814.33 crore (Rs 9,659.2 crore).
“The rise in net profit was better than our expectations,” said Rikesh Parikh, Vice President (Institution Corporate Broking) at Motilal Oswal Securities, adding that the company’s raw material costs were lower by 170 basis points on a quarter-on-quarter basis.
For automobile companies, the second quarter is seasonally weak. The industry expects sales to pick up after the monsoons in the third and fourth quarters.
“The bottom-line was ahead of our estimates led by higher other income and lower tax rate,” said Yaresh Kothari, research analyst with Angel Broking, adding the company’s performance on the operating front was “in-line” with expectations.
M&M’s net profit, together with Mahindra Vehicle Manufacturers Ltd (MVML), a subsidiary set up to source products, rose 5.1 per cent to Rs 1,027.6 crore (Rs 978.1 crore). The combined operating margin of M&M and MVML rose to 14.5 per cent from 13.8 per cent a year ago, even though its gross revenues and other income fell to Rs 9,887.6 crore (Rs 10,786.7 crore).
The fall is due to the “challenging times” the Indian auto industry is currently passing through.
“Despite this, the entity could deliver a growth in the profits in the quarter due to a strong sales performance by its farm equipment sector and a tight control on material costs and all expenses,” the company said. M&M’s domestic tractor sales grew 22.3 per cent to 57,549 units from the year ago quarter, much in line with the domestic tractor industry, which grew 21.2 per cent owing to a good monsoon.
Post the results announcement, M&M shares closed up 1.83 per cent at Rs 895.30 on Wednesday.
CFO appointed
Mahindra & Mahindra has appointed V.S. Parthasarathy as Chief Financial Officer, effective November 14, succeeding Bharat Doshi.
In May, M&M had announced the retirement of Doshi as executive director. He will continue to be a non-executive director on the company's board.