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M&M share price falls 6% despite profitable quarter, global brokerages retain 'buy'

The auto-maker says it will take at least another two years for car sales to return to their pre-pandemic peak, but a slow pace of vaccinations could hurt recovery.

May 31, 2021 / 09:51 AM IST
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Mahindra and Mahindra (M&M) share price was trading lower by more than 6 percent in the morning session on May 31.

The company on May 28 reported profit before exceptional item at Rs 1,002 crore in the quarter ended March 2021 against Rs 323 crore in the year-ago quarter on the back of improvement in demand for passenger vehicles and tractors.

The net profit after exceptional item stood at Rs 163 crore against a loss of Rs 3,255 crore in the same period last year. The massive loss of Rs 3,255 crore in March 2020 was due to the write down of investment in Ssangyong and other international subsidiaries.

Automotive business registered a 42.7 percent year-on-year growth in revenue at Rs 7,858.1 crore in Q4FY21. At the operating level, the segment reported a 73.1 percent growth in EBIT at Rs 390 crore with the margin improving 90 bps YoY to 5 percent during the quarter.

However, the auto maker expects it will take at least another two years for car sales to return to their pre-pandemic peak but a slow pace of vaccinations could hurt recovery prospects, its chief told Reuters in an interview.

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Also read: Mahindra & Mahindra expects car sales to take two years to rebound after COVID shock

Mahindra Chief Executive Officer Anish Shah said sales would rebound by the fiscal year 2023 if a majority of the country's population is inoculated and new COVID-19 cases ease, helping the economy recover.

"Getting back to full normal is going to depend on vaccinations ... (else) we will always have the fear of the next wave coming in and disrupting things again," Shah said.

Shah expects the pace of vaccinations in India to pick up in June but said if that does not happen it would be a concern

"It is about reaching a certain point where we don't have to get into lockdowns once more," he said. "If that happens, we will continue to be in this phase of two steps ahead and one step back."

The stock was trading at Rs 795.10, down Rs 51.10, or 6.04 percent. It has touched an intraday high of Rs 829.50 and an intraday low of Rs 794.20.

Global research firm UBS, however, has a "buy" call on the stock with the target at Rs 1,030 a share. It is of the view that Q4 was in line with international auto+FES to break even by FY23, CNBC-TV18 reported.

"Capex will limit meaningful FCF generation. We maintain buy on improving return profile and strong outlook," UBS added.

Also Read: M&M reports Q4 profit at Rs 1,002 crore

Goldman Sachs also has a buy rating on the stock with the target at Rs 993 a share. Its margin was up 83 bps YoY, underscoring robust cost controls. "M&M is the preferred pick in the PV/CV space. Valuations are attractive at current levels," the brokerage added.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

The views and investment tips expressed by experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Moneycontrol News
first published: May 31, 2021 09:51 am
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