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BILT: The volumes booster - Views on News from Equitymaster

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BILT: The volumes booster

Apr 22, 2010

Performance summary
  • Topline during 3QFY10 (June ending fiscal) grows by a robust 51% YoY boosted by volumes due to added capacity at Bhigwan and Ballarpur coming on stream.
  • Operating margins shrink by 0.5% due to a substantial rise in raw material costs (as percentage of sales).
  • Led by good growth in operating profits and lower tax expenses, bottomline grows by 148% YoY.

Financial performance: A snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Net sales 6,904 10,388 50.5% 21,233 27,468 29.4%
Expenditure 5,555 8,417 51.5% 16,384 21,668 32.2%
Operating profit (EBDITA) 1,349 1,971 46.2% 4,849 5,800 19.6%
EBDITA margin (%) 19.5% 19.0%   22.8% 21.1%  
Interest (net) 469 639 36.1% 1,296 1,686 30.1%
Depreciation 549 770 40.4% 1,596 2,232 39.9%
Profit before tax 331 563 70.2% 1,957 1,882 -3.8%
Tax 164 12 -92.5% 525 308 -41.4%
Minority interest (12) 108   137 257 88.3%
Share of profits in associates - -   16 - -100.0%
Profit after tax/(loss) 179 443 147.6% 1,311 1,317 0.4%
Net profit margin (%) 2.6% 4.3%   6.2% 4.8%  
No. of shares (m)       555.6 555.6  
Diluted earnings per share (Rs)*         3.0  
Price to earnings ratio (x)*         11.2  
(* on a trailing 12-months basis)

What has driven performance in 3QFY10?
  • BILT’s revenues grew by a robust 51% YoY during 3QFY10 largely due to a boost in volumes as its capacity expansions at Ballarpur and Bhigwan came on stream. Unit Kamalapuram (which manufactures rayon grade pulp) also bounced back with revenues growing seven-fold. As a result, the company’s overall paper business logged in a healthy growth of 39% YoY. For the nine month period too, while overall sales grew by 29% YoY, sales from the paper business logged in a growth of 24% YoY.

    Segmental snapshot
      3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
    Paper  5,858 8,133 38.8% 17,306 21,413 23.7%
    PBIT margin (%) 14.8% 12.2%   18.6% 15.4%  
    Paper products & office supplies 763 1,041 36.5% 2,255 2,831 25.5%
    PBIT margin (%) 10.5% 6.0%   10.6% 7.6%  
    Pulp 130 963 638.7% 1,329 2,550 91.9%
    PBIT margin (%) -82.1% 25.2%   -4.7% 13.7%  
    Others 238 264 11.2% 860 846 -1.7%
    PBIT margin (%) -4.0% -4.0%   -3.9% -4.0%  
    Total 6,989 10,401 48.8% 21,751 27,639 27.1%
    PBIT margin (%) 11.9% 12.4%   15.4% 13.8%  

  • BILT’s operating margins contracted by 0.5% during the quarter, largely due to a rise in raw material costs from 36.3% of sales in 3QFY09 to 37.5% in 3QFY10. Higher raw material prices could be attributed to increase in pulp prices. While consumption of stores and spares also increased during the quarter, the company managed to keep staff costs and other expenditure under control. For the nine month period, operating margins shrank by 1.7%.

  • BILT’s bottomline during the quarter grew by 148% YoY and was enhanced by the 46% YoY growth in operating profits as well as considerably lower tax expenses. This was despite the rise in interest costs and depreciation charges. Depreciation was higher during the quarter due to the expanded capacities at Bhigwan and Ballarpur coming on stream.

What to expect?
At the current price of Rs 34, the stock is trading at a price to earnings multiple of 4.4 times our estimated FY11 earnings. With the capacity expansion at Bhigwan and Ballarpur coming on stream, volumes and consequently sales are expected to ramp up going forward. Near term pressures are likely to persist in terms of higher raw material costs as pulp prices remain firm. Also, given that Bhigwan imports pulp, the additional capacity coming on stream means that pulp requirements will increase putting further pressure on margins. However, in the longer term, the Sabah acquisition will be beneficial as pulp from the forests in Malaysia would be used at the Indian plants thereby lowering raw material costs. Overall, we maintain our positive view on the stock from a long term perspective.

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