Mascot: Strong topline growth. - Views on News from Equitymaster

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Mascot: Strong topline growth.

Jan 29, 2001

Mascot recorded a topline growth of 30.4% and a growth of 63% in net profits (without considering extrodinary items) on a QoQ basis. Excluding extra ordinary items the company recorded a drop of 36% in net profits on QoQ basis. The figures on a YoY basis are a whooping 700% growth in topline and net profit figure stood at Rs 153 m compared to losses of Rs 14 m.

(Rs m) 2QFY01 3QFY01 Change
Sales 755 985 30.4%
Other Income 29.2 35 20.5%
Expenditure 622 816 31.2%
Operating Profit (EBDIT) 133 168 27.0%
Operating Profit Margin (%) 17.6% 17.1%  
Interest 4 4 -2.6%
Depreciation 25 33 36.3%
Profit before Tax 133 166 24.7%
Tax 40 14 -65.3%
Extraordinary item 0 93  
Profit after Tax/(Loss) 94 60 -36.4%
Net profit margin (%) 12.4% 6.0%  
No. of Shares (eoy) (m) 27 27  
Diluted number of shares 27 27  
Diluted Earnings per share* 13.9 8.8  
P/E (at current price) 21.3 33.5  

In 2QFY01 the operating margins had improved significantly from 14% in 1QFY01 to 17%. But in 3QFY01 the operating margin has not improved compared to 2QFY01. It has remained stagnant at around 17%, infact has dropped marginally. This marrs the performance because of two reasons. Firstly this is quite low compared to industry standards (around 30%) and secondly giants like Wipro have managed to show a good improvement in margins.

According to the company the new business acquired does have a potential to be shifted offshore. Therefore, there is a scope of improving operating margins. The offshore contribution was quite low to the revenues at 16.3%.

The extra ordinary item of Rs 93 m is due to an acquisition of US $ 2.2 m being written off. The acquisition is expected to bring estimated revenues of Rs 220 m for the 2HFY01.

The geographic break up of revenues is 69% from the United States, 9% from Europe and 22% from Asia Pacific region. As the contribution from Europe is low the company may grow on business from this region in the future.

At a current market price of Rs 295, The stock is trading at P/E multiple 33.5 of times its 3QFY01 annualised earnings. Excluding the effect of extraordinary item the P/E multiple is 13 times 3QFY01 annualised earnings.

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