Mahindra & Mahindra Ltd's Q1FY20 standalone Adj. Net profit rises 13.7% yoy to Rs1,369.2cr : Beats Estimates

The company’s standalone revenue stood at Rs12,922.7cr, down 4.4% yoy and 7.9% qoq.

August 07, 2019 1:36 IST | India Infoline Research Team

Mahindra & Mahindra Ltd Q1FY20

Standalone Results Q1FY20: (Rs. in cr)

Q1FY20 YoY (%)
Revenue 12,922.7 [4.4]
EBITDA 1,622.7 [13.3]
EBITDA Margin (%) 12.6 [129]
Net Profit (adjusted) 1,369.2 13.7
***EBITDA margin change is bps

 For Q1FY20, Mahindra & Mahindra (M&M) reported in-line revenue, however, it beat the PAT estimates. The results for M&M include the combined results of Mahindra and Mahindra Limited (M&M) and Mahindra Vehicle Manufacturers Limited (MVML), which is a 100% subsidiary of M&M.
Revenues for the company (M&M + MVML) stood at Rs12,922.7cr, down 4.4% yoy, in-line with estimates. EBITDA stood at Rs1,622.7cr, ~12% lower than expectation. Thus, EBITDA margin contracted by 129bps yoy to 12.6%, against estimate of 14.5%. During the quarter, company reported an exceptional item of Rs1,367.1cr leading to reported PAT of Rs2,313.8cr. However, adjusting for the same, the Adj. PAT stood at Rs1,369.2cr, up 13.7% (against estimate of Rs1,082cr).
  • Within individual segments, automotive segment revenue declined marginally by 1.1% yoy (decline of 22.4% qoq) with an EBIT decline of 30.6% yoy and EBIT margin contraction of 202bps to 4.7%. Company reported 5.2% yoy decline in vehicle sold volumes, which stood at 1,23,690 units, ~6% lower than estimate.
  • Farm equipment segment reported 12.5% yoy decline in revenue (up 36.7% qoq) with an EBIT decline of 19.2% and EBIT margin contraction of 160bps to 19.3%. Tractors sales volume declined by 15% yoy to 82,103 units, ~5% lower than estimates. Company had a market share of 42.9% during the quarter.
  • Others segment reported 29% yoy growth in revenue with an EBIT growth of of 113.1%.
  • During the quarter, company reported exceptional items of Rs1,367.1cr on account of (a) gain on sale of shares by M&M benefit trust, and (b) gain on buyback by an associate/transfer of certain long-term investments.
Industry performance:
  • For Q1FY20, the Indian auto industry declined by 12.3% yoy, with all segments of the industry reporting a decline (this has happened after six years).
  • The auto industry excluding 2W fell 15.4% yoy because of drop of 18.4% yoy in the Passenger Vehicle (PV) industry and 18.6% yoy decline in MHCV industry.
  • In the PV segment, the demand continues to be impacted by the slowing down of the overall economy, tight credit conditions and delayed monsoon. This has impacted consumer sentiment in both urban and rural India.
  • Also, the stress in the agri sector and finance availability has impacted the demand for LCV 2-3.5T (Pik-UP segment).
  • The HCV goods segment has posted a de-growth of 32% yoy, the worst reduction in 23 quarters. The slowing down of economic activity coupled with the increase in freight capacity of existing fleet due to implementation of new axle loading norms has resulted in many transporters either reducing or temporarily suspending their fleet purchase plans.
  • Further, tractor demand during the quarter also remained sluggish and was adversely impacted by weak sentiment in the agri economy. Agri economy was impacted by delay in SW monsoon, poor spatial distribution in June and weak agricultural incomes due to poor price realization. In Q1FY20, the domestic tractor industry declined by 14.6% yoy with sales of 1,91,305 tractors.

Technical View:

Mahindra & Mahindra Ltd is currently trading at Rs. 532.50, down by 16.8 points or 3.06% from its previous closing of Rs. 549.30 on the BSE.
The scrip opened at Rs. 550.80 and has touched a high and low of Rs. 550.80 and Rs. 527.90 respectively. So far 58,74,970 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.

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