INSUBCONTINENT EXCLUSIVE:
major.
This segment accounts for 33% of sales but 67% of operating profit at M-M
It makes about 20% operating profit margins on the tractor business, while the automotive segment operating margins are less than 5%.
The
tractor segment could outpace all vehicle categories in sales growth for FY21, thanks to the buoyancy in rural income from the rabi harvest
Volume growth could remain slightly positive to flat, but that would look decidedly flattering when the rest of the auto pack shrinks
5-15%.
The tractor industry volume expanded 5.2% in the past five fiscal years, the highest among all vehicle categories, ETIG data showed
This suggests that the tractor industry growth has been resilient to the broader economic cycle
So, M-M is likely to appeal to a lot of fund managers seeking safe and de-risked growth options, with the Mumbai-based firm garnering over
40% share of the market.
Besides, tractor sales are less dependent on footfalls at showrooms, and financing is part of priority-sector
Hence, credit availability will not be challenging for farmers
The stock is trading at 11.8 times its one-year forward earnings, 28% lower than the 15-year average
However, based on the core auto earnings business, the stock is trading at seven times profits, the lowest in six years.
On the sum of the
parts valuation, the company derives more than 40% of its value from investments in other Mahindra companies such as Tech Mahindra and
