X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indo Gulf: Good show - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 7, 2002

    Indo Gulf: Good show

    Indo Gulf has ended the year on an encouraging note. The company recorded a growth of 23% in net sales, mainly on the back of expansion in copper division. Profit before tax jumped more than 45% to Rs 4 bn. However, net profit growth was only 20% due to a sharp spurt in tax provision on the back of new accounting policy on deferred taxation. However, it may be noted that the company recorded a sharp dip in operating margins for the fourth quarter, in line with our expectations.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Sales 5,342 6,662 24.7% 21,988 27,062 23.1%
    Other Income 204 320 56.7% 499 659 32.0%
    Expenditure 3,981 5,560 39.7% 17,102 21,477 25.6%
    Operating Profit (EBDIT) 1,361 1,102 -19.0% 4,887 5,585 14.3%
    Operating Profit Margin (%) 25.5% 16.5%   22.2% 20.6%  
    Interest 383 84 -78.2% 1,453 1,024 -29.5%
    Depreciation 303 294 -3.0% 1,176 1,208 2.7%
    Profit before Tax 880 1,044 18.6% 2,757 4,012 45.5%
    Other Adjustments - -        
    Tax 83 186 123.5% 240 988 311.5%
    Profit after Tax/(Loss) 797 875 9.8% 2,517 3,024 20.2%
    Net profit margin (%) 14.9% 13.1%   11.4% 11.2%  
    No. of Shares (eoy) (m) 225 225   225.2 225.2  
    Diluted Earnings per share       11.2 13.4  
    P/E (at current price)         4.1  

    The drop in operating margins was obviously on the back of drop in LME prices for copper. Copper business (including PMR and DAP business) now accounts for 84% of the revenues for the company. Copper prices did recover partially in the second half of FY02. However, the steep drop in margins in the fourth quarter could be due to the fact that the company enters into forward contracts and thus prices in the fourth quarter might be reflecting late 2001 LME prices. A 32% growth in the copper business was led by sharp ramp-up in volumes through expansion of capacity and sweating existing capacities.

    Copper Statistics...
      FY01 FY02 Change
    Copper production (In MT) 113,227 151,445 33.8%
    Export Volmues (In MT) 10,271 42,879 317.5%
    Export as % of total volumes 9.1% 28.3%
    Copper Revenues (In m) 16,900 22,380 32.4%

    The company has already made a successful entry into the export markets. Considering that the domestic demand growth for copper is expected to be lackluster, the company expects to further entrench into the export markets as it expands its capacity further. The margins in the export business does not compare favorably with that in the domestic markets (due to tariff protection). However, this is expected to be more than offset by considerable economies of scale after the ongoing expansion.

    The DAP (Di-Ammonia Phosphate) and PMR (Precious Metal Refinery business) of the company also performed well with 212% and 47% jump in production respectively. Even in the PMR division, the company enters into forward contracts and hence financials are not reflective of the volatility in the precious metal prices in the last six months. The company earns handsome margins in these two businesses on account of its integration with the copper plant.

    In the current year, margins are expected to remain under pressure on account of the reduction in customs duty on copper (from 35% to 25%), increasing share of copper exports and huge inventory build-up on the LME. (Read more on Copper ) On a conservative basis, we expect margins to dip further by 200 basis points.

    To summarise, though the outlook for the company continues to remain challenging, considering the track record of the company, one would expect Indo Gulf to outperform in the coming fiscal as well . A fast track capacity expansion coupled with improvement in demand could turn fortunes for the company sharply. The second phase of copper expansion has commenced and we expect the expansion to be completed by the second half of the current year. Indo Gulf is eyeing to further integrate its operations by acquiring copper mines abroad. In the long run, this is expected to help the company in hedging the LME price volatility to a large extent. At the current market price of Rs 55, the stock trades at 4x its FY02 earnings.

     

     

    Equitymaster requests your view! Post a comment on "Indo Gulf: Good show". Click here!

      
     

    More Views on News

    Coffee Day Enterprises Limited (IPO)

    Oct 9, 2015

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK INDOGULF CORP.

    • Track your investment in INDOGULF CORP. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MARKET STATS