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Carrier: Margins under pressure

Jan 30, 2001

Carrier Aircon has reported a 17% growth in topline to Rs 993 m for the third quarter ended 31st December 2000. However, a change in the inventory valuation norms has increased expenditure by 22% to Rs 3,273 m in the first nine months of the current year. However, raw material costs as a percentage of sales has come down to 38% in the first nine months of the current year from 40% in the corresponding period of the previous year.

(Rs m) 3QFY00 3QFY01 Change
Sales 851 993 16.7%
Other Income 5 15 229.6%
Expenditure 809 945 16.7%
Operating Profit (EBDIT) 42 48 15.0%
Operating Profit Margin (%) 5.0% 4.9%
Interest 4 13 234.4%
Depreciation 13 14 6.4%
Profit before Tax 30 37 24.1%
Tax 7 10 52.3%
Profit after Tax/(Loss) 24 27 16.1%
Net profit margin (%) 2.8% 2.8%
No. of Shares (eoy) (m) 23.4 23.4
Diluted number of shares 23.4 23.4
Earnings per share* 4.0 4.7
*(annualised)

This, we believe is because the company has been increasingly outsourcing air conditioners instead of manufacturing in-house in the last two years. Though operating profit has gone up by 15% in 3QFY01, operating margins have declined marginally.

Interest costs have also gone up substantially by 131% for the first nine months of the current year to Rs 37 m, which has suppressed profit growth at the net levels. However, the company has maintained margins at the net level at 2.8%.

The stock is trading at Rs 102 at a P/E multiple of 21x the annualised 3QFY01 earnings.

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