M&M net profit may fall 80%, share trading flat ahead of Q1 earnings

Mahindra & Mahindra (M&M) share price was trading higher ahead of the Q1 earnings set to be announced today. The Anand-Mahindra led firm's earnings performance will be affected by coronavirus-induced lockdown which brought economic activity to a halt from March-end till June this year.

Share price of M&M was trading 0.64% higher at Rs 613.45 against previous close of Rs 609.55 on BSE.

Mahindra & Mahindra share is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. Total 0.45 lakh shares changed hands amounting to turnover of Rs 2.75 crore. The share touched an intra day high of Rs 616 on BSE. Market cap of M&M rose to Rs 76,307 crore on BSE.

The firm is likely to post 80.4 per cent fall in adjusted net profit in Q1, according to Prabhudas Lilladher. Sales is seen declining by 56 per cent.

M&M's overall volumes for the quarter were lower by 56.3 per cent year-on-year (YoY) and 37.2 per cent quarter-on-quarter (QoQ), where tractors were down around 24 per cent YoY, the brokerage said.

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Kotak Institutional Equities sees net profit crashing by 85 per cent. Net sales are likely to fall 56.6 per cent. The brokerage expects EBITDA to decline by 56 per cent YoY due to negative operating leverage in the quarter.

Edelweiss sees net profit falling by 85.3 per cent, while revenues may have declined 58.9 per cent. However, EBITDA margins are likely to decline by only 3.5 per cent YoY to 10.6 per cent helped by a significantly higher share of tractor sales at around 68 per cent, compared with 40 per cent a year ago.

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Earnings of auto firms have been hit by coronavirus in the first quarter of current fiscal.

On July 29, Maruti Suzuki India reported its first quarterly loss  since July 2003 for three months ended June 2020. Maruti said large part of the first  quarter saw zero production and zero sales in compliance with a lockdown stipulated by the government.

The firm reported its first ever quarterly loss since its listing on bourses in July 2003. In Q1, the firm reported consolidated loss of Rs 268.3 crore hit hard by coronavirus pandemic.

In corresponding quarter of previous fiscal, the firm reported net profit of Rs 1,376.8 crore. Net sales declined to Rs 3,679 crore in the first quarter as against Rs 18,738.8 crore in the year-ago period.

Similarly, another  auto major Bajaj Auto reported a net profit dip of more than half to Rs 528.04 crore YoY as pandemic induced restrictions stalled operations during most of the first quarter. This was 53% lower in comparison to Rs 1,125.67 crore during the corresponding period last fiscal.

By Aseem Thapliyal