Most analysts cut their target prices for Mahindra & Mahindra Ltd. after the tractor maker's first-quarter results showed scars of a prolonged auto slowdown in India.
M&M, along with Mahindra Vehicle Manufacturers Ltd., yesterday reported earnings for the quarter ended June that missed estimates. Profit fell 26 percent year-on-year to Rs 918 crore on the back of 4 percent decline in revenue to Rs 12,997 crore.
The company sold 1.3 lakh units between April and June, a decline of 6 percent from the year-ago period, according to data compiled by BloombergQuint. Tractor sales fell 14.1 percent on a yearly basis to 86,350 units during the period.
V Parthasarathy, group chief financial officer, however, expects tractor sales to pick up in the near term because of a monsoon that has progressed better than forecast. But given the decline in the first few months of 2019-20, Mahindra's full-year guidance on tractor sales is flat to slightly positive, he told BloombergQuint in an interview.
As far as passenger vehicle sales are concerned, Parthasarathy said he believes the auto slowdown makes it difficult for Mahindra to give any outlook.
Here's what analysts made of M&M Q1 Results 2019-20
BofAML
- Maintains ‘Buy', cuts target price to Rs 725 from Rs 800.
- Margins beat estimates, but volume outlook remains tough.
- Margins improved on better cost control and improved mix.
- Management expects volumes to stabilise in H2FY20.
CLSA
- Maintains ‘Sell', cuts target price to Rs 495 from Rs 590.
- Weak Q1 results, weakening tractor outlook.
- Sharp fall in legacy SUV volumes eating away benefits of new launches.
- Rising investments in subsidiary MVML remains a concern.
UBS
- Maintains ‘Buy', cuts target price to Rs 730 from Rs 800.
- Earnings outlook is weak despite valuation support.
- M&M needs a comprehensive restructuring plan to improve profitability.
- M&M believes tractors could surprise positively given monsoon progress.
Macquarie
- Maintains ‘Buy', cuts target price to Rs 650 from Rs 830.
- Lowers FY20 EPS by 13 percent on lower volumes, weak product mix.
- Expects earnings to remain under pressure in the near term.
- M&M's core business is trading at 8X FY21 price to earnings ratio.
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