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VST Ind.: Steep rise in FY12 earnings - Views on News from Equitymaster

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VST Ind.: Steep rise in FY12 earnings

Apr 19, 2012

VST Industries has declared its results for 4QFY12. The company has reported a 24% YoY growth in sales and a 36.5% YoY growth in profits. Here is our analysis of the results.

Performance summary
  • Sales for VST Industries grew by 24% YoY during 4QFY12. Other operating income stood at Rs 2.8 m compared to Rs 5.3 m earned in the year-ago quarter. The overall income during the quarter was up by 23.7% YoY. During FY12, total income was up by 17.7% YoY.
  • Operating margin expanded by 130 basis points (YoY) to 29.4% as a result of decline in staff costs and other expenses (as a percentage of sales). The operating profitability for FY12 surged to 30.6% from 24.5% earned in the year-ago quarter.
  • Net profit grew by 36.5% YoY as a result of higher operating income as well as other income and 8% drop in depreciation outgo. For FY12, the company's earnings surged by 50% YoY.

(Rs. m) 4QFY11 4QFY12 Change FY11 FY12 Change
Income 1,583 1,959 23.7% 5815 6844 17.7%
Expenditure 1,138 1,382 21.4% 4390 4747 8.1%
Operating profit (EBDITA) 445 577 29.6% 1426 2098 47.1%
EBDITA margin (%) 28.1% 29.4%   24.5% 30.6%  
Other income 50 74 48.2% 171 257 50.3%
Interest (net) -   -     -   -    
Depreciation 102 94 -7.9% 244 248 -1.7%
Profit before tax 393 556 41.7% 1,353 2,107 55.7%
Extraordinary inc/(exp) -   -     -   -    
Tax 124 189 52.9% 403 682 69.3%
Profit after tax/(loss) 269 367 36.5% 950 1,425 50.0%
Net profit margin (%) 17.0% 18.8%   16.3% 20.8%  
No. of shares (m)         15.4  
Diluted earnings per share (Rs)*         92  
Price to earnings ratio (x)         21  
* trailing 12 month earning

What has driven performance in 4QFY12?
  • VST Ind reported a robust 24% rise in topline.

    Cost break-up...
    (Rs m) 4QFY11 4QFY12 Change FY11 FY12 Change
    Raw materials 729 937 28.6% 2853.4 3081.8 8.0%
    % sales 46.0% 47.8% 181.88 49.1% 45.0% -403.90
    Staff cost 163 172 5.3% 606.00 619.5 2.2%
    % sales 10.3% 8.8% -153.42 10.4% 9.1% -136.93
    Other expenditure 246 273 10.9% 930.30 1045.3 12.4%
    % sales 15.6% 13.9% -161.39 16.0% 15.3% -72.46

  • Although raw material expenses increased by 28.6%, the company managed to expand operating margin by 130 basis points backed by rationalization in employee costs and other expenses. As a proportion of sales, employee costs were down by 153 basis points and staff costs declined by 161 basis points on a YoY basis.

  • Earnings grew by a steep 36.5% backed by 29.6% jump in operating income and a 48% surge in other income earned during the quarter on a YoY basis. The depreciation expenses fell by 8% during the quarter.

What to expect?
At a price of Rs 1971, the stock is trading at 21 times its trailing twelve months earnings.

The company has been recording robust growth in earnings backed by brisk sales growth. The magnitude of excise duty hike on cigarettes has been much lower than anticipated. In the Union Budget 2012-13, the excise duty on only premium cigarettes (length > 65 mm) has been raised by imposing a 10% ad valorem duty on 50% of the retail sale price. However the excise duty on hand-rolled bidis and other competing tobacco products such as gutkha and pan masala has been increased which will have a favourable impact on cigarette sales. Going forward, the stock continues to hold potential backed by a profitable business model and strong dividend payouts. We continue to maintain our HOLD view.

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Mar 22, 2019 (Close)


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