M&M Q3 PAT seen down 5% at Rs 691 cr

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Mahindra and Mahindra  (M&M), a part of Mahindra group, is expected to report a profit after tax of Rs 691 crore in the third quarter of FY12, degrowth of 5% as compared to Rs 734 crore in a year ago quarter.

Profit after tax included one- time profit of Rs 118 crore on account of sale of long term investment.

Adjusted profit after tax is likely to go up by 12% to Rs 691 crore from Rs 616 crore year-on-year.

Revenues are seen going up by 30% to Rs 8,000 crore from Rs 6,162 crore during the same period.

Operating profit margin is expected to decline at 12.6% in the October-December quarter of FY12 versus 15.1% in the corresponding quarter of last fiscal.

Highlights

** Volume trajectory continues to be strong and greater share of tractors will result in ASP improvement.

** In Q2, M&M earnings disappointed on margin front (down at 11.8% in Q2 versus 15.2% QoQ due to jump in other expenditure)

** Company then took a price hike of 1-2% in September 2011 on both UV's and tractors to pass on costs

** This quarter, higher tractor volumes and price hikes to lead to slight QoQ margin growth despite higher steel prices

** Earnings growth will get limited despite revenue growth due to high cost pressure from raw material (in Q2 also RM /sales was up QoQ at 72.6% versus 71.8%) 

** Realizations up by 5.5% YoY (1% QoQ), due to 1.5% price increase in tractors from end September 2011, and improvement in product mix with higher proportion of tractors.

Volume Growth in Q3

* Record volumes in both auto and tractor division

* Auto division volumes buoyed by incremental volume from XUV 500 and Maxximo minivan

* Tractor segment saw weakness in November and December, but that was made up in October when volume were strong

** Total volume up 24% (up 7% QoQ) at 1.90 lakh units versus 1.53 lakh YoY

** Auto volume up 30% at 1.24 lakh units versus 95225 YoY

** Tractor volume up 12% at 65754 units versus 58608 YoY

Watch out for:

** Have the margins bottomed out after last quarters disappointment

** Tractor growth has been slowing down for last 3 months starting November, volume growth came down sharply to 12% in Q3 versus 24% in H1FY12

** Going ahead, full benefit of 9 launches in FY11 and 8 new launches in FY12 along with ramp-up in XUV5OO production to support volume growth