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Bajaj Hindusthan: Sugar prices prove sweet - Views on News from Equitymaster
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Bajaj Hindusthan: Sugar prices prove sweet
Jan 12, 2010

Performance summary
  • Sales of Bajaj Hindusthan grew by 74% YoY during 1QFY10. This growth was aided by a robust performance by the sugar segment.
  • Operating (EBITDA) margin for the company grew by 31.5% to stand at 34% during the quarter. This growth comes on the back of a robust performance by the sugar segment.
  • Net profit margin for the company stood at 13.5%. This increase came on the back of higher sales growth coupled with lower operating costs.


Financials
Rs(m) 1QFY09 1QFY10 (%) Change
Net sales 3,622 6,291 73.7%
Expenditure 3,532 4,149 17.5%
Operating profit (EBDITA) 90 2,142 2274.7%
EBDITA margin (%) 2.5% 34.0%  
Other income - 32  
Interest 486 456 -6.2%
Depreciation 485 510 5.3%
Profit before tax (881) 1,207  
Tax (321) 355  
Profit after tax/(loss) (559) 852  
Net profit margin (%) -15.4% 13.5%  
No. of shares (m) 141 177  
Diluted earnings per share (Rs)*   10.4  
Price to earnings ratio (x)*   22.1  
* 12 month trailing earnings

What has driven performance in 1QFY10?
  • Sales of Bajaj Hindusthan grew during the quarter aided by the sugar segment. The sugar segment grew by 69% YoY during the quarter. This is a reflection of the high sugar prices which have been ruling the market. The distillery and power generation segments also showed robust growth. While the distillery segment grew by 23% YoY, power division grew by 38% YoY during the quarter.

  • Operating (EBITDA) income grew by 2274% YoY during the quarter. This growth comes on the back of lower raw material costs as a percentage of sales. Raw material costs during the quarter fell from 67% to 52% as a percentage of sales.

  • EBIT margin showed an improvement due to a strong performance across business segments. EBIT margin for sugar stood at 23% during the quarter after being in the red during the corresponding quarter in FY09. Furthermore, EBIT margin for power improved from 65% in 1QFY09 to 77% in 1QFY10. On the other hand, the margins for the distillery business continued to stay in the red albeit the loss was almost half of that in 1QFY09.

    Segment wise performance
    Rs (m) 1QFY09 1QFY10 (%) Change
    Sugar 3,559 6,016 69.0%
    % of total revenues 89.2% 91.2%  
    EBIT % -7.1% 22.5%  
    Distillery 124 153 23.1%
    % of total revenues 3.1% 2.3%  
    EBIT % -54.0% -23.6%  
    Power 307 424 38.3%
    % of total revenues 7.7% 6.4%  
    EBIT % 64.8% 76.4%  
    Total revenues 3,990 6,594 65.2%

  • Net profit stood in the black after a loss in 1QFY09. This improvement comes on the back of higher sales in the form of higher sugar realisations.

What to expect?
At the current price of Rs 230, the stock is trading at a multiple of 22 times its trailing 12-months earnings. The company has done well during the quarter thanks to higher sugar prices. With sugarcane shortage expected to continue, the company will continue to reap the benefit of higher prices.

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