M&M expected to post about 60% decline in Q1FY21 revenues due to covid woes


Mahindra and Mahindra Ltd (M&M), India’s largest tractor manufacturer, is expected to report a sizeable decline in its consolidated revenues for the June quarter on the back of low sales owing to covid-19–led disruptions.

According to Edelweiss Securities Ltd, M&M’s consolidated revenues are expected to be at Rs5,260 crore, down 59% from Rs12,806 crore from the year-ago period. The brokerage estimates that M&M’s June quarter earnings before interest, taxes, depreciation and amortization, or Ebitda, would be Rs531 crore, dropping from Rs1,794 crore from the year-ago period.

“Despite about 60% fall in revenues, M&M’s Ebitda margins are expected to decline by only 3.5% year-on-year (y-o-y) to 10.6%, cushioned by a significantly higher share of tractors,” the brokerage said in a preview report.

Q1FY21 has been a washout for all vehicle manufacturers, owing to the pandemic-induced lockdown, which was imposed from the last week of March. Automakers saw their manufacturing units remaining shut for about 40 days before gradually resuming operations in May.

However, a number of challenges, such as extension of regional lockdowns, supply chain disruptions, low consumer sentiments and others continues to impact the demand resulting in almost 2 months of no business.

M&M, however, is better placed as the government exempted agricultural activities from lockdown in April. As a result, the company resumed its farm equipment business and saw strong recovery in tractor demand.

The company sold 64,577 tractors during the June quarter, falling behind Q1FY20 volumes of 82,913 units by 22%.

Meanwhile, total domestic vehicle sales of M&M during the June quarter stood at 27,581 units, down 78% y-o-y.

Emkay Research estimates M&M’s consolidated Ebitda margin at 13% and profit after tax of Rs251 crore for the June quarter, as against Rs918 crore reported for the year-ago period.

“Realization is expected to increase in the automotive segment due to higher spares mix and price hikes (BS-VI, safety norms and cost inflation). Ebitda margin contraction is limited on account of better gross margins, despite sharp fall in volumes. Gross margin is expected to improve due to benign mix (higher share of tractors and spares) and lower input cost,” the brokerage said in its report.

News Source:- livemint

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