Mahindra & Mahindra Limited’s (M&M) Farm Equipment Sector (FES) reported 30% growth in tractor sales in December 2017. FES sold 18,288 tractors in December 2017 against 14,047 tractors in December 2016.
Domestic sales for December 2017 were 16,671 tractors vs. 12,619 tractors in December 2016, the growth of 32%, while export sales for December 2017 were 1,617 units vs. 1,428 units in December 2016, the growth of 13%.
The company management expects the good sales show to continue in the coming months on the back of healthy reservoir levels and good rabi sowing.
M&M derived revenue from farm equipment (50%), automotive including 2W (27%), financial services (18%) and others (5%) as on FY17. It is a market leader in the tractor industry with a share of ~44% as on 1HFY18. On account of new launches and normal monsoon, Management expects the industry to grow at 12-14% in FY18. In the automotive business, M&M expects UV segment to perform well backed by two new launches and three product refreshes.
M&M’s FE business continues to do well and we expect the company to maintain a leadership position on account of new launches. This along with new UV launches is expected to drive 11% revenue CAGR over FY17-20E. Although UV market share slippage is expected to halt, volume pressure amidst rising competitive intensity is expected to limit EBITDA margin expansion to 200bp over FY17-20E. Owing to increased capex over FY17-20E and higher tax rate, we expect PAT to grow at 11% CAGR over FY17-20E.
Mahindra & Mahindra Ltd is currently trading at Rs751.5, up by Rs6 or 0.8% from its previous closing of Rs745.5 on the BSE.
The scrip opened at Rs753 and has touched a high and low of Rs756.5 and Rs746.6 respectively. So far 1466784 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs92,680cr.
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