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Company Report

M& M

Mahindra & Mahindra Ltd has turned out a decent performance in the past two quarters despite tractors, its biggest product group, facing one of the worst times.

M&M has reported an 8 per cent rise in net sales at Rs 820.64 crore (Rs 761.10 crore) over the previous corresponding quarter. Sequentially, however, it was down 1 per cent over the June quarter sales of Rs 828.43 crore. Drought and over-capacity continued to haunt the tractor business in the September quarter as well, resulting in a 24 per cent decline in sales over the previous corresponding quarter. Exports grew at a robust 121 per cent.

In the first two quarters of the current year, the automotive division (commercial vehicles, SUV and three-wheelers) has done very well. This growth was helpful on the back of reduced payroll of the past two years.

Controlled operational costs and higher sales have seen margins improve with operating profits registering a 61 per cent growth over the year-ago period to Rs 73.91 crore (Rs 45.98 crore). Sequentially, however, it was down 1 per cent. OPM seems to be stagnating at 9 per cent over the past two quarters.

Other income at Rs 18.75 crore (Rs 13.30 crore) was up 41 per cent over the previous corresponding quarter. Interest cost was controlled and at Rs 20.02 crore (Rs 22.15 crore) was 10 per cent below the year-ago period and 20 per cent down from the preceding quarter cost of Rs 24.87 crore.

With a major rise in the tax provisioning at Rs 38.70 crore against a write-back of Rs 1.50 crore during the same period last year the company reported a net loss (excluding the effect of extraordinary income of Rs 65 crore from the sale of stake in Mahindra Sintered Products Limited) against a profit of Rs 5.70 crore during the same period last year.

The outlook of tractors does not look too good even now. On the automotive side, the low-cost SUV Scorpio has been a big success. Monthly sales crossed the 1,350 levels in October this year, up from 750 in July, the month of launch.

The stock currently trades at Rs 105 discounting its fiscal 2001-02 EPS of Rs 10.34 by 10 times. It has seen a good upmove since end-October following the bullish outlook on the Scorpio project. Of course, the current price does not include the value of Mahindra British Telecom, the telecom software subsidiary.

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