InvestorQ : Why were profits of Mahindra CIE flat despite higher revenues in September 2022 quarter?
Rutuja Nigam made post

Why were profits of Mahindra CIE flat despite higher revenues in September 2022 quarter?

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1 month ago
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You are right that profit growth was tepid for Mahindra CIE Automotive despite good growth in sales. Let us look at the sales performance first. For the September 2022 quarter, Mahindra CIE reported 30.3% growth in total sales at Rs2,723 crore on a consolidated basis. The company saw growth in its automotive components and solutions business across India and Europe and that also resulted in better top line. The India business of Mahindra CIE Automotive grew 33.4% to Rs1,543 crore for the quarter while the revenues from the Europe business grew by a healthy 20.2% at Rs1,192 crore. Mahindra CIE has gained from the all-round recovery in the automotive business globally and that is visible in numbers.

Mahindra CIE

Rs in Crore

Sep-22

Sep-21

YOY

Jun-22

QOQ

Total Income (Rs cr)

₹ 2,723.15

₹ 2,090.69

30.25%

₹ 2,707.20

0.59%

Net Profit (Rs cr)

₹ 171.37

₹ 166.42

2.97%

₹ 188.85

-9.26%

Diluted EPS (Rs)

₹ 4.52

₹ 4.39

₹ 4.98

Net Margins

6.29%

7.96%

6.98%

As you rightly said, the profit growth did not match up to the sales growth. Despite sales growing at 30.2%, the PAT grew by just about 2.97% in the September 2022 quarter at Rs171.37 crore. The high frequency pressure was visible in the profits down -9.26% sequentially. This can be largely explained by a sharp spike in the cost of raw materials in the quarter, especially the metals that go into making automotive components and forgings. The real factor was that Q2FY22 quarter (the corresponding last year) saw Rs292 crore reversal of tax, which enhanced the profit of the base year. Net margins stood at 6.29% for Q2FY23 compared to 7.96% in the year ago period of Q2FY22 and 6.98% in June 2022 quarter.

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