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Indo Gulf : Copper prices to the rescue - Views on News from Equitymaster
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  • Apr 23, 2001

    Indo Gulf : Copper prices to the rescue

    Indo Gulf Corporation declared results as per market expectations. While the company recorded a growth of 6.2% in net sales, it was mainly on account of higher sales realisation in its copper division. Infact fertiliser sales showed a negative growth of almost 37%. An interim upward reassessment of the urea capacity and the consequent reduction in retention price by the government coupled with a restriction on production at 100% level of reassessed capacity adversely affected the profitability of the fertiliser business. However, the copper division more than compensated for it.

    (Rs m) FY00 FY01 Change
    Sales 20,713.2 21988 6.2%
    Other Income 485.5 499.1 2.8%
    Expenditure 16,337.2 17101.5 4.7%
    Operating Profit (EBDIT) 4,376.0 4,886.5 11.7%
    Operating Profit Margin (%) 21.1% 22.2%  
    Interest 1,349.8 1452.7 7.6%
    Depreciation 1,114.4 1176.2 5.5%
    Profit before Tax 2,397.3 2,756.7 15.0%
    Other Adjustments   -  
    Tax 276.0 240.0 -13.0%
    Profit after Tax/(Loss) 2,121.3 2,516.7 18.6%
    Net profit margin (%) 10.2% 11.4%  
    No. of Shares (eoy) (m) 225.2 225.2  
    Diluted Earnings per share 9.4 11.2  
    P/E (at current price)   3.3  

    Another significant development was that the company pre-paid its debt of Rs 1,407 m during the year which is expected to reduce the interest burden considerably in the coming year. Further, the company also fully pre-redeemed its 10.75% Cumulative Redeemable Non-Convertible Preference Shares of Rs 1,000 m.

    The results of Indo-Gulf reflect the firm trend of copper prices witnessed in the last financial year. Average copper prices have remained in the range of US$ 1,600-1,650 after touching a high of US$ 2,000 per tonne in October'2000.

    At the current market price of Rs 37, the scrip is trading at a P/E of 3.3 times its FY01 earnings. Its looks attractive given the government's initiatives to revive the fertiliser demand.



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