M&M share tanks 7% post earnings; here's what brokerages say

Share of Mahindra and Mahindra slipped 7 per cent to hit an intraday low of Rs 790.00 after the auto-major reported the earnings for the quarter and fiscal ended March 2021. The stock opened 2 percent lower at Rs 829.50 against the previous close of Rs 846.20.

The share of auto-maker stands higher than 20 day, 50 day, 100 day, and 200 day moving averages and lower than 5 day and 10 day moving averages.

The stock has gained 85 per cent in the last 12 months and risen 12 per cent since the beginning of this year. Market cap of the firm fell to Rs 1,00,605.36 crore.

For FY21, revenue from operations declined 0.65 per cent to Rs 44,574 crore from Rs 44,866 crore in the previous year. Net profit stood at Rs 923 crore against Rs 740 crore in the previous year.

Net profit stood at Rs 163 crore for the quarter ended March 2021, which was impacted by a one-time loss of Rs 840 crore. The company reported a net loss of Rs 3,255 crore in the year-ago period.

Capital allocation actions resulted in a significant decline in exceptional losses.Revenue from operations grew 48 per cent to Rs 13,338 crore in the March-ended quarter against Rs 9,005 crore a year ago.

"The Automotive Sector continued its focus on cost optimization and reduced its fixed expenses by over Rs 900 crores over the last two years & hence keeping its margin resilience even under challenging times," the company said.

"Overall demand remained robust for the Company's products in Q4FY21. However, the global shortage of semi-conductors impacted the production & sales for the quarter," it added.

"Our associates deserve all the credit for outstanding performance in a tough year. Our primary focus has been "people first", keeping our associates and our communities safe," said Dr. Anish Shah, Managing Director & CEO, M&M Ltd.

"We have delivered our promise on capital allocation actions and have seen very positive results. We are now focused on growth across our core businesses, growth gems, and digital platforms," he added.

"Our approach of Walk-Run-Fly has delivered strong financial returns in FY21. The strong margins and turnaround of global subsidiaries in FES along with a robust automotive demand momentum through the focused SUV strategy have set the ground for us to now accelerate to fly," said  Mr. Rajesh Jejurikar, Executive Director, M&M Ltd.

New products and technologies, farm machinery opportunity, Krishe and cost management set us up for a bold, aggressive growth trajectory," he added.

Goldman Sachs has a 'Buy' call on the stock with a target price of Rs 993 per share. The brokerage firm mentioned that valuations are attractive at current levels and it is the preferred pick in the PV/CV space.

"We cut our FY22E/FY23E EPS estimate by 5%/2% to account for sales loss due to the ongoing lockdown. We maintain our Buy rating with a target price of Rs 980 per share (Mar'23E SoTP)," said Motilal Oswal.

"While growth in Tractors is slowing down after robust growth in FY21, the Auto segment is expected to see strong momentum in both LCVs and SUVs," the brokerage house added.

M&M has also announced the highest-ever dividend of Rs 8.75 per share for FY21, in light of the strong financial performance and to commemorate the 75th year of the company.