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SSI : Good growth at high costs - Views on News from Equitymaster
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  • Jan 31, 2001

    SSI : Good growth at high costs

    SSI recorded a 13.7% rise in sales and 8.8% drop in net profit on a QoQ basis. The decline in bottomline is due to a write off of Rs 27.8 m towards dimmunition in value of investments in its subsidiaries. Excluding which, the net profit figure would have actually risen by a marginal 1.3%.

    (Rs m) 2QFY00 2QFY01 Change
    Sales 424 1,154 172.1%
    Other Income 3 80 2696.7%
    Expenditure 280 839 199.4%
    Operating Profit (EBDIT) 144 315 119.0%
    Operating Profit Margin (%) 33.9% 27.3%  
    Interest 4 13 203.1%
    Depreciation 36 56 53.8%
    Profit before Tax 106 326 207.3%
    Tax 19 48 154.8%
    Provision for contingencies 0 -28  
    Profit after Tax/(Loss) 87 251 186.7%
    Net profit margin (%) 20.6% 21.7%  
    No. of Shares (eoy) (m) 12.1 13.4  
    Diluted number of shares 13.4 13.4  
    Diluted Earnings per share* 6.2 74.9  
    P/E (at current price) 235.9 19.4  

    It's operating margin has gone up by 200 basis points. The break up of expenditure included 25% towards staff costs, 31% towards course execution charges, 5% towards software purchase and 9.8% towards other expenses.

    On a YoY basis, the net profit has gone up by 187% and the revenues have gone up by 190% in 2QFY01. However, the operating margin has significantly come down to 27.3% from around 33.9% in 2QFY00. This is due to the fact that its employee costs have gone up by 668% YoY during the quarter.

    The improvement in operating margins (compared to 1QFY01) is due to the fact that contribution of revenues from software development increased to 40% compared to 34% in 1QFY01. The contribution of revenues from education declined to 55% compared to 58% in 1QFY01. The remaining 5% came from global support services.

    At a current stock price of Rs 1,454 the stock is trading at a P/E multiple of 19 times its 2QFY01 annualised earnings.



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