Mahindra Q1 Net up 41 pct, Above Forecast

By Reuters Posted 26 July 2006 @ 05:49 pm EET     Print     Reprint     E-Mail     Comments

MUMBAI (Reuters) - India's biggest tractor and utility vehicle maker, Mahindra & Mahindra Ltd., on Wednesday posted a better-than-expected quarterly net profit on strong sales and higher exports, lifting its shares 7 percent.

Mahindra, which has about 30 percent of India's tractor market, the world's biggest by volume, said net profit rose 41 percent to 2.04 billion rupees ($43.6 million) in its fiscal first quarter to end-June from 1.45 billion reported a year earlier.

Net sales rose 23.4 percent to 22.36 billion rupees from 18.12 billion.

The company's stock ended up 6.6 percent at 563.10 rupees in a firm Mumbai market that rose nearly 2 percent.

The median forecast of a Reuters poll was for a net profit of 1.74 billion rupees on revenue of 21.96 billion.

The company's profit was helped by higher other income of 454 million rupees in the quarter, up from 204 million a year ago. Operating margins rose to 12.1 percent from 10.65 percent.

Mahindra, which also has nearly half of India's market for utility vehicles, sold 60,495 vehicles and tractors in April-June, up 15 percent from a year earlier.

The passenger vehicle market in Asia's third-biggest economy is forecast to nearly double to 2 million units by 2010, boosted by rising incomes, affordable loans and new product launches.

But margins are under pressure from higher costs of raw materials like steel and rubber, while firmer interest rates and higher fuel prices could slow demand.

Leader Tata Motors Ltd. on Tuesday posted a lower-than-expected 40 percent rise in quarterly profit.

Demand for heavy trucks in India's $5-billion bus and truck industry is rising as infrastructure improves.

Mahindra has an $80-million joint venture with Navistar Inc.'s International Truck and Engine Corp. to make 50,000 medium and heavy trucks a year from 2007. It will also make Logan sedans with France's Renault from 2007.

The world's number-four tractor maker, Mahindra aims to be at the top in five years. It has a joint venture with China's Jiangling Motors Co. and is seeking acquisitions in Europe after a bid for Romania's Tractorul Brasov was suspended.

It is also developing a new platform for a utility vehicle named "Ingenio", touted as a replacement for its dated Bolero model and slated for launch in 2008.

Mahindra shares, valued at more than $4.5 billion, fell nearly 1 percent in April-June, compared to an 11 percent drop on the auto sector sub-index and a 6 percent decline on the benchmark stock index.