M&M Q1 Preview: Profit, revenue to decline 50%, but margin may improve
Kotak Institutional Equities expects revenues to decline by 57 percent YoY, mostly in line with volume decline, and profit to fall 62 percent in quarter ended June 2020.
August 07, 2020 / 07:23 AM IST
Automotive and tractor manufacturer Mahindra & Mahindra is expected to report over 50 percent fall year-on-year (YoY) across all key earnings parameters for the quarter ended June 2020 dented by lower volumes due to lockdown and weak demand.
Brokerages see profit falling in the range of 50-70 percent and revenue is decline is expected to be around 55 percent YoY.
Overall sales volumes of Mahindra & Mahindra declined 56 percent YoY to 95,308 units during June quarter. Auto volumes fell 77 percent YoY and tractor sales slumped 24 percent.
Kotak Institutional Equities expects revenues to decline by 57 percent YoY, mostly in line with volume decline, and profit to fall 62 percent.
According to Emkay Global, the revenue decline could be 54 percent and profit may fall by 73 percent. "Realisations are expected to increase in the automotive segment due to higher spares mix and price hikes (BS6, safety norms and cost inflation)," said the brokerage.
On the operating front, its earnings before interest, tax, depreciation and amortisation (EBITDA) may decline over 55 percent due to negative operating leverage but better gross margin may limit contraction in EBITDA margin.
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"EBITDA margin contraction is limited, on account of better gross margins, despite a sharp fall in volumes. Gross margin is expected to improve due to benign mix (higher share of tractors and spares) and lower input cost," Emkay Global said.
The stock gained 14.7 percent year-to-date. During Q1 FY21, it surged 79 percent on hopes of growth in tractors segment due to normal monsoon, strong Kharif season minimal effect of lockdown on agricultural activities.