ITW: Improving fundamentals - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

ITW: Improving fundamentals

Mar 9, 2001

ITW Signode India Limited is one of India's largest industrial packaging solutions company. The company was mired in losses till FY99. Since then it has turned around. It reported profits of Rs 146 m in FY00. In the first nine months of FY01, ITW has shown a 13% growth in its bottomline YoY to Rs 123 m. This improvement in performance comes on the back of several cost cutting measures employed by the company's management. The company trimmed its workforce from 1,305 to 978 employees in FY00. As a result employee costs were down to 13% of sales compared to 15% of sales in the previous year. The company has further streamlined its employee strength in FY01.

Particulars 3QFY00 3QFY01 Change 9m FY00 9m FY01 Change
Net Sales 528 466 -11.8% 1,384 1,391 0.5%
Other Income 15 22 50.3% 23 39 73.9%
Total Expenditure 474 414 -12.6% 1,222 1,221 -0.1%
Operating profit 54 52 -4.3% 162 171 5.4%
Operating profit margin 10.2% 11.1% 11.7% 12.3%
Interest 5 0 25 0
Depreciation 19 12 -35.8% 51 36 -29.3%
Profit/(Loss) before tax 45 62 37.6% 109 174 59.0%
Provision for Taxation 0 17 0 51
Net Profit/(Loss) 45 45 -0.2% 109 123 12.7%
Net profit margin 8.5% 9.6% 7.9% 8.8%
No. of shares outstanding (m) 22.9 22.9 22.9 22.9
Reserves excluding revaluation reserves 758 918 758 918
Earning per share (Rs) * 7.8 7.8 6.4 7.2
Current P/e ratio 6.8

The company's interest burden came down siginficantly on the back of its 'zero debt' status achieved during FY00. ITW's profit before tax was up a significant 59% in the nine month period ended December 2000. Its net profit got deflated because of higher taxes.

The company's brand building drive helped it earn better margins compared to FY99. The company is trimming its direct customer focus and passing it on to its dealer network. Its already reduced its direct customers to 600 from over 3000 in FY98. ITW is looking to brings its direct customers down to about 200-250 in a year's time.

Going forward the company will focus on steel to metal strap conversion in non-ferrous metals and introduce recyclable products. The company hopes improve its profitability through these measures.

Despite its superlative performance, concerns remain over the company's high exposure to the metals segment (40% contribution to turnover in FY00), and its dependence on its US-based parent ITW Inc., which bailed it out from its financial mess in the last couple of years.

At the current stock price of Rs 49 the stock trades at a P/e multiple of 6.8 times its annualised nine month FY01 earnings. Given the company's focus and improving balance sheet, the valuation is likely to see a re-rating.

Equitymaster requests your view! Post a comment on "ITW: Improving fundamentals". Click here!


More Views on News

Infrastructure Boom Ahead. Here are 3 Ways to Play It... (Views On News)

Aug 24, 2021

India is expected to become the third largest construction market next year. For that, it needs huge investments.

G R Infraprojects Makes a Bumper Listing on Bourses. Big Gains for IPO Investors (Views On News)

Jul 19, 2021

GR Infra shares were subscribed over 100 times in its IPO.

Here's Why the Stock of Ashoka Buildcon was in Focus Today (Views On News)

Jul 13, 2021

Ashoka Buildcon shares up on bagging NHAI project.

G R Infraprojects IPO to Hit the Market on 7 July. All You Need to Know (Views On News)

Jul 1, 2021

G R Infraprojects' IPO will be an offer for sale of up to 11.5 m shares. There will not be any fresh issue of shares.

What Triggered the Over 10% Surge in Greaves Cotton Today? (Views On News)

Jun 17, 2021

Last week, the stock of Greaves Cotton has soared 23%. What's fueling the rally?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


  • Track your investment in ITW SIGNODE with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks