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SSI : Good growth at high costs

Jan 31, 2001

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  
*(annualised)      
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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