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GTL: Tough times - Views on News from Equitymaster
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  • Jan 25, 2002

    GTL: Tough times

    GTL’s 3QFY02 financials mirror the tough times it is facing. Its revenues have declined by 3% sequentially and the net profit figure has decreased by 11% (excluding extraordinary income). However, this is due to sharp drop in other income and a significant rise in taxes. If the extraordinary income is considered, then the company’s bottomline has grown by 20%. On a YoY basis, the company’s financials look quite troubled. The topline has declined by 40% and the net profits have fallen by 63%, excluding extraordinary income.

    However, the company has managed to control costs effectively. Consecutively, the operating margins have improved compared to 2QFY02.

    (Rs m) 2QFY02 3QFY02 Change
    Sales 1,407 1,370 -2.6%
    Other Income 162 97 -40.0%
    Expenditure 1,073 965 -10.1%
    Operating Profit (EBDIT) 334 405 21.3%
    Operating Profit Margin (%) 23.7% 29.6%  
    Interest - -  
    Depreciation 238 213 -10.6%
    Profit before Tax 258 290 12.3%
    Extra-ordinary item - 74  
    Tax 18 76 321.1%
    Profit after Tax/(Loss) 240 288 19.9%
    Net profit margin (%) 17.1% 21.0%  
    Diluted number of shares 70.7 70.7  
    Diluted Earnings per share* 13.6 16.3  
    P/E (at current price)   7.0  

    The revenue break up indicates a weakness in all the business areas on a YoY basis. However, on a QoQ basis, only software and application services have shown a steep decline in revenues. The other two revenue streams, engineering services and enterprise network services continue to grow.

    Service offering (Rs m) 2QFY02 % contribution 2QFY02 % contribution change
    Software and application services 612 43.5% 457 33.3% -25.4%
    Enterprise network services 578 41.0% 646 47.1% 11.7%
    Engineering services 218 15.5% 268 19.5% 22.8%
    Total 1,407   1,370   -2.6%

    The company has given revenue guidance for FY02. It expects the topline to decline by 30% to 35%. The net profits are expected to dip more significantly. The fall is expected to be in the range of 54% to 62%. At the current market price of Rs 114, the stock price is trading at a P/E multiple of 6x its FY02 estimated earnings. The stock price is likely witness a downside due to the uncertain prospects in the near future.



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