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Raymond Margins improve sharply - Views on News from Equitymaster
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  • Jan 25, 2001

    Raymond Margins improve sharply

    Raymond has posted a 11% drop in sales for the first nine months ended 31st December 2000. The results are not comparable because the company has sold both its cement ans steel division during the current year to Lafarge India and ThyssenKyupp of Germany respectively. However, one significant aspect to note is that operating margins in the third quarter of the current year has gone up from 12.5% in 3QFY00 to 19.2% in 3QFY01.

    (Rs m) 3QFY00 3QFY01 Change
    Sales 3,330 2,571 -22.8%
    Other Income 53 28 -47.7%
    Expenditure 2,914 2,077 -28.7%
    Operating Profit (EBDIT) 416 494 18.6%
    Operating Profit Margin (%) 12.5% 19.2%  
    Interest 240 178 -25.8%
    Depreciation 258 124 -51.7%
    Profit before Tax (28) 219 -874.2%
    Other Adjustments - -  
    Tax (3) - -100.0%
    Profit after Tax/(Loss) (25) 219  
    Net profit margin (%) -0.8% 8.5%  
    No. of Shares (eoy) (m) 75.1 75.1  
    Diluted number of shares 75.1 75.1  
    Earnings per share* (1.3) 11.7  

    We believe that the company has started to reap the benefits of exiting non-core businesses. Raw material costs, for instance, has come down by more than 50% in 3QFY01 to Rs 600 m (20% in 1HFY01). We expect the total raw material costs to halve in the current year apart from savings in terms of manufacturing expenses.

    The company has acquired the balance equity shareholding in Raymond Calitri Denim, the subsidiary whose net worth has completely eroded, thus merging the company with Raymond Limited. The company is yet to account for the merger and the sale of its cement plant .

    The stock is currently trading at Rs 128 at a P/E multiple of 10.9x the 3QFY01 earnings. Ths scrips have moved up sharply over the last two months with the company announcing its buyback at Rs 160 per share



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