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Maharashtra Seamless: Overcomes freight fright - Views on News from Equitymaster
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Maharashtra Seamless: Overcomes freight fright
Apr 23, 2009

Performance summary
  • The topline grew by robust 38.3%YoY for the complete year FY09.
  • Operating profits grew by 22.7% YoY, lower than the topline on account higher operating expenses, resulting into EBITDA margin contraction of 2.2% during the year.
  • Bottomline grew by 29.6% YoY, as higher other income and lower tax rates further boost profitability.
  • Net profits grew by 19.6%YoY during 4QFY09 on the back of 39.1% YoY growth in the topline.


Finanacial snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 3,950 5,496 39.1% 15,122 20,916 38.3%
Expenditure 3,092 4,476 44.7% 12,183 17,309 42.1%
Operating profit (EBDITA) 858 1,020 18.9% 2,939 3,607 22.7%
EBDITA margin (%) 21.7% 18.6%   19.4% 17.2%  
Other income 11 12 2.7% 292 444 52.1%
Interest (net) 13 12 -9.9% 38 116 208.3%
Depreciation 44 48 7.9% 174 183 5.3%
Profit before tax 812 972 19.7% 3,019 3,752 24.3%
Extraordinary items            
Tax 271 326 19.9% 1,067 1,223 14.6%
Profit after tax/(loss) 541 646 19.6% 1,952 2,529 29.6%
Net profit margin (%) 13.7% 11.8%   12.9% 12.1%  
No. of shares (m) 70.5 70.5   70.5 70.5  
Diluted earnings per share (Rs)*         35.9  
Price to earnings ratio (x)**         4.7  

What has driven performance in FY09?
  • The topline of the company grew by a robust 38.3%YoY during FY09 mainly on account of higher realizations. The revenues from steel pipes and tubes segment grew by around 39% YoY during the same period.

    Cost breakup
    (Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
    Raw materials 2,452 3,254 32.7% 9,550 13,552 41.9%
    % sales 62.1% 59.2%   63.2% 64.8%  
    Staff cost 85 81 -4.5% 230 242 5.4%
    % sales 2.2% 1.5%   1.5% 1.2%  
    Manufacturing expenses 467 634 35.7% 1,797 2,358 31.2%
    % sales 11.8% 11.5%   11.9% 11.3%  
    Other expenditure 89 507 472.5% 607 1,157 90.6%
    % sales 2.2% 9.2%   4.0% 5.5%  

  • The company’s operating margins have contracted by 2.2% during the fiscal. Greater than proportionate rise in raw material costs as well as other expenses have been responsible for the contraction in margins. Infact, the latter has come in higher by as much as 91%, shaving off the company’s margins by 150 basis points. Worth noting that freight expenses that form a part of other expenses have jumped more than threefold during the fiscal.

  • The bottomline growth for the company has come in at 30% YoY. This is higher than the growth in operating profits mainly on account of higher other income and lower tax outgo. Depreciation charges, by remaining benign, have also played their part in boosting the bottomline growth.

What to expect?
At the current price of Rs 169, the stock is trading at a multiple of 4.5x the company’s expected FY11 earnings estimate. Given that the company has not only met our FY09 estimates but also surpassed them significantly, there could be a need to revise our estimates upwards. However, we would take a call on the same and also come up with a more detailed analysis after having a meeting with the management. We remain positive on the stock.

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Feb 22, 2018 03:37 PM

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