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PTC: Better margins buoy profits - Views on News from Equitymaster
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PTC: Better margins buoy profits
Feb 9, 2011

PTC has posted around 4% YoY growth in net sales during 3QFY11. Net profits have risen by 139% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow by around 4% YoY during 3QFY11 and 7% YoY during 9mFY11.
  • Operating margins improve to 2.3% in 3QFY11, helped by lower power purchase costs (as percentage of sales).
  • Aided by better operating margins and lower depreciation, net profit surge by around 139% YoY during the quarter.

Financial performance: A snapshot
(Rs m) 3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
Units traded (m) 4,444 5,813 30.8% 15,036 19,290 28.3%
Sales 16,976  17,580 3.6% 65,288 69,858 7.0%
Expenditure  16,871  17,169 1.8%  64,726  68,788 6.3%
Operating profit (EBDITA) 105  411 292.2%  563 1,070 90.1%
Operating profit margin (%) 0.6% 2.3%   0.9% 1.5%  
Other income 142  155 9.1%  583  473 -18.9%
Depreciation 14  13 -5.9%  41  37 -9.4%
Interest 2 8 221.7%  3 11 237.5%
Profit before tax 230  545 136.5%  1,101  1,495 35.7%
Extraordinary income/(expense) 0 1   0  1  
Tax 72  166 131.8%  300  438 46.1%
Profit after tax/(loss) 159 380 138.8%  802 1,057 31.8%
Net profit margin (%) 0.9% 2.2%   1.2% 1.5%  
No. of shares       294.6 294.6  
Diluted earnings per share (Rs)*         4.1  
P/E ratio (x)*         21.6  
* On a trailing 12-months basis

What has driven performance in 3QFY11?
  • PTC managed to grow its net sales by around 4% YoY during 3QFY11. This was despite a strong 31% YoY growth in traded volumes, which stood at 5,813 m units during the quarter. However, the realisations on these volumes averaged Rs 3 per unit, down around 21% YoY and thus impacting the overall sales. For 9mFY11, PTC's trading volumes increased by 28% YoY, but due to lower realisations, sales grew by just about 7% YoY.

  • PTC's operating margins improved to 2.3% in 3QFY11, from 0.6% in 3QFY10. This was helped by lower power purchase costs. On a per unit basis, these costs declined by 22% YoY during the quarter, and the same was visible in the lower realisations earned by the company.

  • PTC grew its net profits by 139% YoY during 3QFY11. This was largely helped by the improvement in operating margins, as operating profits were up a massive 292% YoY.

What to expect?
At the current price of Rs 88, the stock is trading at a multiple of 15.4 times our estimated FY13 earnings and 1 time our estimated FY13 book value per share (ResearchPro subscribers can click here). The stock has corrected sharply over the past two months. At the current levels, we believe it presents itself as a good investment opportunity for long term investors.

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