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New car launches don’t add speed to Mahindra profitability
Posted on 15th November 2018
Shares of Mahindra and Mahindra Ltd lost 2.3% on the National Stock Exchange after it reported weaker-than-expected numbers for the September quarter (Q2) on Wednesday. Revenue growth was a tepid 6.6%, reflecting muted volumes. But what caught the Street off guard is a sizeable reduction in profitability of the automobile segment.

Margins from automobiles dropped 2.7 percentage points from a year ago. The rise in raw material costs, introductory pricing for the new vehicle and higher promotional expenses were the reasons. This had a bearing on the consolidated entity as well, with margins falling by a higher-than-expected 1.5 percentage points to 14.5%.

Thanks to a non-recurring income and lower tax expense, net profit jumped 26%. But with core earnings trailing estimates, this brought no cheer. With Wednesday’s fall, the stock has lost almost 17% from its June quarter results. During the same period, the Nifty lost 7.6% and indications are the underperformance may not reverse in a hurry.

Weighing on the outlook are muted demand conditions. Tractor sales during the recent festive season were subdued. As a consequence, growth outlook for the segment is now tilted towards the lower end of the 12-14% guidance (versus the higher end earlier).

That said, the recently launched utility vehicle Marazzo is seeing a good response. If not for this new vehicle, Mahindra’s utility vehicle sales would be falling (utility vehicles were up just 1% in October).

But as Bharat Gianani, analyst at Sharekhan Ltd, says, muted demand conditions mean that volume expectations for the industry have come down.

Even so, with Mahindra preparing to launch two new cars (Inferno S201 and Alturas), one in the popular compact SUV segment, volumes should rise, adds Gianani. But the big question is how much of this translates to revenue and profit growth.

The company is yet to fully pass on the recent rise in raw material costs. New product launches mean promotional costs are expected to remain high in the current as well as the next quarter. Unless demand sees noticeable recovery and helps Mahindra spread costs, chances are profitability will remain subdued in the near term, weighing on earnings expectations.

Adding to investors’ concerns is the tight liquidity condition. The firm claims it has not lost any sales due to lack of financing. But reduced risk appetite means interest rates are expected to perk up and it has to be seen how it navigates this. A significant portion of the sales comes from rural areas where availability of finance is crucial.

To conclude, new car launches and steady farm equipment business will aid Mahindra. But much depends on the sales momentum and recovery in profitability.

Related Companies: Mahindra India   

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Uber Eats may sell Indian biz to Swiggy by March, keep 10% stake: Report
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Uber Eats, the food delivery arm of ride-hailing app Uber Technologies Inc, is close to a deal to sell its Indian business to Bengaluru-based Swiggy, the Economic Times reported on Friday.

The share-swap deal is expected to close by next month and will give Uber a 10 percent stake in food delivery service Swiggy, the paper said, citing people privy to the development.


Samsung S10+ to hit Indian shelves from Mar 8 priced Rs 73,900 onwards
Posted on 22nd February 2019
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Samsung had launched three models - Galaxy S10+, Galaxy S10 and Galaxy S10e - in San Francisco on February 20. These flagship devices will compete head-on with Apple’s iPhone that is seeing sales slowdown in many markets, including China.


GMR, Terna sign agreement for new airport in Greece; to invest 500 mn euros
Posted on 22nd February 2019
GMR Infrastructure on Friday said its subsidiary GMR Airports and its Greek partner Terna Group have signed a concession agreement for construction of the new international airport in Greece's island Crete.

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Petrol prices hiked to Rs 71.29 in Delhi; check latest price for metros
Posted on 22nd February 2019
Oil marketing companies hiked the price of petrol by 14-15 paise and that of diesel by 16-18 paise a litre the major metros on Friday. In Delhi, petrol prices were hiked by 14 paise to Rs 71.29 a litre as against Rs 71.15 yesterday. One litre of diesel can be purchased for Rs 66.48 in the national capital. In case of Mumbai, one litre of petrol can be purchased for Rs 76.93 up from Rs 76.79 per litre, implying a 14 paise hike.

The diesel cost has been raised to 69.63 in the financial capital. In Kolkata, one litre of petrol is retailing at Rs 73.39, while diesel can be bought for Rs 68.27. In Chennai petrol prices have been hiked to Rs 74.02, while consumers will now have to pay Rs 70.25 in Chennai. The revised rates are applicable from 6 am on Friday morning.


Bata India hits record high; stock zooms 50% in 4-months
Posted on 22nd February 2019
Shares of Bata India hit a new high of Rs 1,301 apiece, up 1 per cent on the BSE, surging 50 per cent in past four months after it reported a strong earnings growth in December 2018 (Q3FY19) quarter and foreign portfolio investors buying. In comparison, the S&P BSE Sensex was up 6 per cent during the same period.

Thus far in the calendar year 2019 (CY19), Bata India has outperformed the market by gaining 15 per cent, against unchanged benchmark index. In CY2018, it soared 52 per cent, as compared to a 6 per cent rise in the Sensex.


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