Hughes Software's sober 4Q performance - Views on News from Equitymaster

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Hughes Software's sober 4Q performance

Apr 12, 2001

After a brilliant performance in 3Q registering a seqential growth of 26%, Hughes Software declared a sober 10% growth in revenues and 20% in net profits in 4QFY01 Quarter on Quarter (QoQ).On a Year on Year (YoY) basis Hughes has clocked a rise of 86% in revenues and 84% in net profits. The highlight of the performance is that the company has managed to improve operating margins by about 600 basis points.In 4QFY01 the company has reduced staff costs by 100 basis points compared to 3QFY01. There has been a marginal drop in travelling costs but the major cut in expenses has been in the area of other expenses where the company has cut corners by more than 400 basis points.

For FY01 the company has shown a growth of 85% in revenues compared to FY00. The net figure has gone up by 67%. However, compared to FY00 the operating margins for the company have declined by almost 200 basis points.

The company has changed its portfolio slightly. Though the contribution to the revenues from services to parent Hughes Network Systems (HNS) has remained constant at 34%. The contribution from other services has dropped by 100 basis points compared to 3QFY01 and this has been offset by a similar increase in the contribution from products.

(Rs m) 3QFY01 4QFY01 Change FY00 FY01 Change
Sales 563 620 10.1% 1,073 1,985 85.0%
Other Income 26 25 -3.8% 135 110 -18.5%
Expenditure 362 360 -0.6% 661 1,264 91.2%
Operating Profit (EBDIT) 201 260 29.2% 412 721 75.0%
Operating Profit Margin (%) 35.7% 41.9%   38.4% 36.3%  
Interest - - - -  -
Depreciation 38 43 14.7% 119 149 25.2%
Profit before Tax 190 242 27.5% 428 682 59.3%
Tax 6 21 262.1% 51 51  
Profit after Tax/(Loss) 184 221 20.1% 377 629 66.8%
Net profit margin (%) 32.7% 35.6%   35.1% 31.7%  
No. of Shares (eoy) (m) 33.3 33.3   33.3 33.3  
Diluted Earnings per share* 22 27   11 19 66.8%
*(annualised)            
P/E (X)         24  

At a market price of Rs 449, the stock is trading at a P/E multiple of 23 times its FY01 earnings.


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