Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Aksh Optifibre: Margins maraudered - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 25, 2002

    Aksh Optifibre: Margins maraudered

    On an annual basis, Aksh Optifibre Ltd. has posted a respectable topline growth, especially keeping in mind the difficult industry scenario for telecom companies. Having said that, the rapid downturn in the industry over the past eighteen months is reflecting on the bottomline.

      QoQ   YoY  
    (Rs m) 2QFY02 3QFY02 Change 3QFY01 3QFY02 Change
    Net Sales 554 431 -22.1% 284 431 52.1%
    Other Income 2 3 48.9% 4 3 -23.4%
    Expenditure 480 402 -16.1% 245 402 64.0%
    Operating Profit (EBDIT) 75 29 -60.7% 39 29 -23.9%
    Operating Profit Margin (%) 13.5% 6.8%   13.6% 6.8%  
    Interest 7 9 37.1% 6 9 45.1%
    Depreciation 16 16 5.2% 5 16 265.5%
    Profit before Tax 54 7 -88.0% 32 7 -79.3%
    Tax 10 (7)   3 (7)  
    Profit after Tax/(Loss) 44 14 -68.2% 29 14 -51.8%
    Net profit margin (%) 7.9% 3.2%   10.2% 3.2%  
    No. of Shares (m) 22.0 22.0   22.0 22.0  
    Diluted earnings per share* 7.9 2.5   5.2 2.5  
    P/E ratio   23.7     23.7  
    * annualised            

    The growth in topline could largely be a result of the company ramping up operations at its four plants and widening its product portfolio to cater to a larger market. Although these efforts could be steps to beat the slowdown, the company does not seem to have escaped the long arm of global and domestic economic downturn. Not only are YoY growth rates declining, QoQ sales are registering negative growth over the past two quarters. Optic fibre cable manufacturers seem to have taken a double hit on the topline. The drop in global demand, besides affecting sale volumes, has also led to a sharp slide in optic fibre prices.

    While sale volumes are difficult to achieve and realisations sliding, the ramp up in production has kept costs sticky. Consequently, operating margins have come under severe pressure. OPM has declined by 6.7 percentage points QoQ, which could reflect the poor pricing power of the industry, currently. Operating profits, YoY, have been adversely affected by the slide in margins. On a nine month basis, operating profits and margins have increased due to higher YoY growth in the first two quarters.

    (Rs m) 9mFY01 9mFY02 Change
    Net Sales 759 1,506 98.4%
    Other Income 14 8 -40.5%
    Expenditure 675 1,256 86.2%
    Operating Profit (EBDIT) 85 249 195.2%
    Operating Profit Margin (%) 11.1% 16.6%  
    Interest 20 21 4.3%
    Depreciation 12 42 253.2%
    Profit before Tax 66 194 195.1%
    Tax 5 36  
    Profit after Tax/(Loss) 60 158 161.6%
    Net profit margin (%) 8.0% 10.5%  
    No. of Shares (eoy) (m) 22.0 22.0  
    Diluted earnings per share* 3.7 9.6  
    P/E ratio   6.3  
    * annualised      

    With new capacity getting commissioned increased depreciation provisions is reflecting on the income statement. Also, expansion in operations is likely to have resulted in higher working capital requirement, which has led to higher interest costs. The effective tax rate, YoY, for 9mFY02 has increased substantially from 8.3% to 18.7%.

    At Rs 60 the scrip is trading on a multiple of 6.3x 9mFY02 annualised earnings. In the current fiscal, the stock has been trading in a P/E band of 5x-8x. Perceptions on telecom equipment companies have shifted dramatically from technology to commodity stocks. The current operating margins seem to reflect commodity characteristics.



    Equitymaster requests your view! Post a comment on "Aksh Optifibre: Margins maraudered". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms