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Sanghvi Movers: Pains of slowdown remain - Views on News from Equitymaster

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Sanghvi Movers: Pains of slowdown remain

Feb 5, 2010

Performance summary
  • Sales decline by 7% YoY during 3QFY10, 7% YoY during 9mFY10.
  • Operating margins at 75.6% during the quarter, almost as same level as 3QFY09.
  • On the back of weak sales and higher depreciation, net profits drop by 13% YoY during the quarter. Profits down 13% YoY during the nine-month period.

Financial performance snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Sales 888 828 -6.7% 2,631 2,458 -6.6%
Expenditure 215 202 -6.0% 647 593 -8.3%
Operating profit (EBIDTA) 672 625 -7.0% 1,984 1,865 -6.0%
Operating profit margin (%) 75.7% 75.6%   75.4% 75.9%  
Other income 21 11 -50.1% 38 50 31.2%
Interest 147 120 -18.1% 385 361 -6.2%
Depreciation 179 200 11.2% 491 572 16.5%
Profit before tax 367 316 -13.9% 1,146 982 -14.4%
Tax 128 107 -16.4% 392 327 -16.6%
Profit after tax/(loss) 239 209 -12.6% 755 655 -13.2%
Net profit margin (%) 27.0% 25.3%   28.7% 26.6%  
No. of shares       43.3 43.3  
Diluted earnings per share (Rs)*         21.0  
P/E ratio (x)*         10.2  
* On a trailing 12-months basis

What has driven performance in 3QFY10?
  • A weak overall demand environment affected Sanghvi Moversí (SML) sales performance during 3QFY10. This led to the same declining by around 7% YoY during the quarter. The company completed a capital expenditure of Rs 1 bn by the end of December 2009. It added 10 cranes during the quarter to take its fleet size to 327. SMLís revenues from fast growing sectors like power, steel and cement sectors went up t0 around 70% during 3QFY10, from around 50% during the previous quarter.

  • SML maintained its operating margins almost at 3QFY09 levels. Its operating expenditure stood at 16.9% of sales in 3QFY10, up from 16.7% in 3QFY10. Subsequently the companyís operating profits dropped by 7% YoY during the quarter. This, combined with higher depreciation charges, led to the company reporting a net profit decline of 13% YoY during 3QFY10.

What to expect?
At the current price of Rs 214, the stock is trading at a multiple of 10.2 times its trailing 12 months earnings. SMLís 9mFY10 performance suggests that the impact of slowdown is still being felt by the company. However, with huge investments lined up in sectors like power and large-scale infrastructure projects coming up, we see the company regaining its growth trajectory in the medium to long term.

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