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MAHINDRA & MAHINDRA

Mahindra & Mahindra has been trying to widen its business portfolio dominated by tractors to one that is balanced with utility vehicles. It launched Bolero three years ago and then Scorpio last year. The results have been unimpressive so far.

For the third quarter ended December 2002, it reported a total income of Rs 998.42 crore (Rs 923.98 crore) up 8 per cent from the year-ago period (19 per cent sequentially). However, total costs having gone up by a much higher rate net profit declined by 15 per cent over the year-ago period at Rs 30.81 crore (Rs 36.42 crore).

M&Mís net sales at Rs 960 crore (Rs 917.79 crore) moved up 5 per cent from the year-ago period (17 per cent sequentially). M&M has traditionally been a leader in tractors sector but poor monsoons and a slack demand for tractors has seen this segment shrink by 24 per cent over the previous corresponding quarter.

Margins were squeezed with operating profit falling 24 per cent over the year-ago period to Rs 76.63 crore Rs 101.04 crore). Sequentially it was up 4 per cent from the September quarter profit of Rs 73.91 crore. The OPM at 8 per cent was a percentage point below the preceding quarter and well below the 11 per cent it earned last year.

M&Mís profitability has been strengthened by a massive 500 per cent year-on-year rise in the other income at Rs 38.42 crore (Rs 6.19 crore) (up 101 per cent sequentially).

Further a 4 per cent decline in the interest cost over the year-ago period to Rs 21.01 crore and a moderate increase of 13 per cent in depreciation provisioning helped pre-tax profit move up 65 per cent sequentially and 8 per cent over the previous corresponding quarter.

The rise in the before tax profits has seen the tax provision rise 76 per cent over the year-ago period to Rs 22.20 crore (Rs 12.58 crore) but the same was down 43 per cent over the September quarter provision of Rs 38.70 crore eventually leading to a 15 per cent decline in the net profits (excluding extraordinaries) over the year-ago period.

The stock has come off its high after having risen sharply since the end of the September quarter. Currently trading at Rs 105 the stock discounts its December quarter annualised EPS of Rs 10.63 by 10 times. Though growth is erratic, the stock is under-owned and not too expensive. It will be a market performer.

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