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Pratibha Ind: Execution worries fade away - Views on News from Equitymaster
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Pratibha Ind: Execution worries fade away
Feb 9, 2011

Pratibha Industries has announced 3QFY11 results recently. The company has reported 23.4% YoY and 29.0% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 23.4% YoY during 3QFY11. Revenue growth was led by 24.1% YoY growth in the Infrastructure & Construction segment. However, revenues from the saw pipe manufacturing division declined 36.6% YoY.
  • Operating profits increased 27.3% YoY during 3QFY11.
  • Despite higher provision for deferred taxes, net profits increased 29.0% YoY due to strong performance at the operating level.
  • The company declared an interim dividend of Rs 0.2 per share.
  • The company raised Rs 1.5 bn during the quarter through QIP and preferential allotment route.


Standalone financial snapshot
(Rsm) 3QFY10 3QFY11 Change 9MFY10 9MFY11 Change
Sales 2,220 2,740 23.4% 6,595 8,234 24.8%
Otheroperating income  15 12 -22.1% 40 41 1.8%
Expenditure 1,904 2,331 22.4% 5730 7080 23.6%
Operatingprofit (EBDITA) 331 422 27.3% 905 1,194 32.0%
Operatingprofit margin (%) 14.8% 15.3%   13.6% 14.4%  
Otherincome 0 -   1 1 48.8%
Interest 166 195 17.1% 352 489 39.0%
Depreciation 28 37 29.4% 78 106 36.1%
Profitbefore tax 137 190 39.0% 475 600 26.1%
Tax 27 49 79.5% 119 159 33.5%
Profitafter tax/(loss) 110 142 29.0% 356 440 23.7%
Netprofit margin (%) 4.9% 5.1%   5.4% 5.3%  
No. of shares (m)         99.4  
Basicweighted earnings per share
(Rs) (Not Annualised)
        5.0  
P/Eratio (x) *         7.1  

What has driven performance in 3QFY11?
  • Net sales increased 23.4% YoY in 3QFY11 led by strong execution in a difficult environment. Revenues from the infrastructure & construction segment increased 24.1% YoY. However, revenues from the saw pipe manufacturing segment declined 36.6% YoY during the quarter.

    Segmental break-up
     (Rs m)   3QFY10   3QFY11  Change  9MFY10   9MFY11  Change
    Infrastructure & Construction   2,006 2,489 24.1% 5814 7625 31.2%
    Manufacturing  488 310 -36.6% 1337 799 -40.3%
    Unallocated  0  -   1 1 48.8%
    Total*   2,494 2,799   7,152 8,425  

  • Operating profits registered strong growth of 27.3% YoY in 3QFY11. Operating margins expanded from 14.8% in 3QFY10 to 15.3% in 3QFY11 on the back of decline in operating expenses as a percentage of revenues. Operating expenses declined from 85.2% (as a percentage of revenues) in 3QFY10 to 84.7% in 3QFY11.

  • Despite higher tax provisioning, bottom line registered 29.0% YoY growth due to a strong performance at the operating level. The effective tax rate increased from 20% in 3QFY10 to 26% in 3QFY11 due to higher provisioning during the quarter.

What to expect?
At the current price of Rs 52 the stock trades at 4.7 times our estimated FY13 earnings. The current order book of the company stands at Rs 36 bn providing revenue visibility for the next 2-3 years. In an environment where execution was a key the company has managed to register healthy top and bottom-line growth which has come in as a positive surprise. Considering the attractive valuations and the recent under-performance we believe the stock offers a good investment opportunity from 2-3 year perspective.

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