M&M’s overall tractor volumes increased due to aggressive procurement of crops by the government, record rabi crop and good progress in the sowing of Kharif crop in June 2020.
Mahindra & Mahindra (M&M) share price surged nearly 6 per cent to Rs 528.05 apiece on BSE a day after the company reported robust growth in sales figures for June in the tractor segment. The stock price has more than doubled from March lows of Rs 246 apiece, registering a growth of 115 per cent. According to BSE data, the market capitalisation of the top Sensex gainer in today’s trade stood at Rs 65,329.77 crore at the time of writing this report. Analysts attribute strong tractor sales in June to robust rabi harvest, the timely arrival of the monsoon which aided Kharif sowing, and government reforms. “M&M’s overall tractor volumes increased by 10% yoy led by 12% yoy increase in domestic volumes due to aggressive procurement of crops by the government, record rabi crop and good progress in the sowing of Kharif crop in June 2020,” analysts at Kotak Institutional Equities said in a report.
The company sold 36,544 units of the tractor in June as compared to 33,094 tractors in the same month of the preceding year. Domestic tractor sales to 35,844 units as compared to 31,879 units in June 2019. “This is our second highest June sales ever,” said Hemant Sikka, President, Farm Equipment Sector, M&M.
Sikka said that the positive sentiments were led due to the timely arrival of the south-west monsoon, combined benefits of a record rabi harvest, government support for Agri initiatives and good progress in the sowing of the Kharif crop. The management also highlighted that on the back of rising rural demand and movement of essential goods across the country, key brands such as Bolero, Scorpio and Pick-ups, are all seeing good traction. Moreover, better cash flows in rural markets have helped boost tractor demand during June, Sikka added.
Research and brokerage firm Motilal Oswal Financial Services prefers M&M and Eicher Motors and Motherson Sumi Systems among mid-caps. “We prefer companies with (a) higher visibility in terms of demand recovery, (b) a strong competitive positioning, (c) margin drivers, and (d) balance sheet strength,” said the brokerage firm.
Both the brokerage firms Motilal Oswal Financial Services and Kotak Institutional Equities believe that growth witnessed in the tractor sales in June were due to strong rural demand and improved farm sentiments.