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BILT: Higher tax restricts profit growth - Views on News from Equitymaster

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BILT: Higher tax restricts profit growth
Apr 26, 2011

BILT has announced its 3QFY11 results. The company has reported a 12.5% YoY growth in sales and 11% YoY increase in net profits. Here is our analysis of the results.

Performance summary
  • Topline during 3QFY11 (June ending fiscal) grows by a 12.5% YoY largely led by growth in its pulp business.
  • Operating margins saw a marginal increase of 0.3% on account of reduction in staff costs by nearly 0.8% (as percentage of sales).
  • The company’s interest expense rose by only 5% despite the high interest rate scenario. This helped the company post a strong 32% YoY growth in PBT. However, higher tax expenses restricted the net profit growth to 11% YoY.


Financial performance: A snapshot
(Rs m) 3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
Net sales 10388 11692 12.5% 27468 33229 21.0%
Expenditure 8417 9438 12.1% 21668 26705 23.2%
Operating profit (EBDITA) 1971 2253 14.3% 5800 6524 12.5%
EBDITA margin (%) 19.0% 19.3%   21.1% 19.6%  
Interest (net) 639 667 4.5% 1686 2019 19.8%
Depreciation 770 843 9.5% 2232 2451 9.8%
Profit before tax 563 743 32.1% 1882 2054 9.2%
Tax 12 137 1013.0% 308 356 15.6%
Minority interest 108 115 6.5% 257 318 23.5%
Profit after tax/(loss) 443 492 11.0% 1317 1381 4.8%
Net profit margin (%) 4.3% 4.2%   4.8% 4.2%  
No. of shares (m) 655.6 655.6        
Diluted earnings per share (Rs)*   3.10        
Price to earnings ratio (x)*   11.83        

What has driven performance in 3QFY11?
  • BILT's revenues grew by 12.5% YoY during 3QFY11 led by growth in revenue from its pulp business (up 35.5%). Paper products saw a decline of 2.8% YoY in revenues while revenues from other segments fell by nearly 19%.

    Segmental snapshot
      3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
    Paper 8,133 9,148 12.5% 21,413 25,871 20.8%
    PBIT margin (%) 12.2% 9.6%   15.4% 11.2%  
    Paper products & office supplies 1040.7 1,011 -2.8% 2830.8 3270.8 15.5%
    PBIT margin (%) 6.0% 7.0%   7.6% 7.0%  
    Pulp 963 1305 35.5% 2550 3427 34.4%
    PBIT margin (%) 25.2% 37.7%   13.7% 30.6%  
    Others 264 213 -19.3% 846 661 -21.8%
    PBIT margin (%) -4.0% -4.0%   -4.0% -4.0%  
    Total 10,401 11,677 12.3% 27,639 33,230 20.2%
    PBIT margin (%) 12.4% 12.3%   13.8% 12.5%  

  • The operating margins saw a marginal rise of 0.3%. This was largely due to a fall in raw materials cost (as a percentage of sales) from 37.5% in 3QFY10 to 36.6% in 3QFY11 and staff costs from 6.4% of sales in 3QFY1o to 5.6% this quarter. Power and stores and spare consumption, however, pared some of the gains as these witnessed a rise during the quarter.

  • The company's interest expense rose by only 5% despite the high interest rate scenario. The rise in depreciation charges were also not much. These factors coupled with the growth in operating profits led to the robust 32% YoY growth in PBT. Having said that, growth in net profits was restricted to 11% YoY during the quarter due to higher tax expenses.

What we expect?
At the current price of Rs 36.7, the stock is trading at a price to earnings multiple of 11.8 times FY11 earnings. We are in the process of revising our estimates for the company and will come out with a view soon.

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