X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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.
Bajaj Hindusthan: By products led growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bajaj Hindusthan: By products led growth
May 7, 2008

Performance summary
  • The results are not comparable as for the current quarter and six months ended March 31, 2008, figures for a new segment - Power are included.
  • Reports a 5% YoY decline in sales for 2QFY08. While sales of the sugar division fall by 7.3% YoY, the distillery segment grows by 106% YoY.

  • Operating margins improve by 13% YoY and 15% YoY for 2QFY08 and 1HFY08 respectively. While labour and other expenses (as percentage of sales) have increased, lower raw material costs aid the margin improvement.

  • Higher margins and lower interest costs aid the superlative growth in the bottomline during the quarter.

Rs(m) 2QFY07 2QFY08 Change 1HFY07 1HFY08 Change
Net sales 5,139 4,903 -5% 8,006 8,342 4%
Expenditure 4,762 3,927 -18% 7,332 6,426 -12%
Operating profit (EBDITA) 377 976 159% 674 1,917 184%
EBDITA margin (%) 7.3% 19.9%   8.4% 23.0%  
Other income 138 98 -29% 217 185 -14%
Interest 150 102 -32% 99 296 200%
Depreciation 353 462 31% 568 894 57%
Profit before tax 13 509 3943% 224 913 307%
Tax (24) 79.1 -432% 15 186 1155%
Profit after tax/(loss) 36 430 1082% 209 727 247%
Net profit margin (%) 0.7% 8.8%   2.6% 8.7%  
No. of shares (m) 141.4 141.4   141.4 141.4  
Diluted earnings per share (Rs)*         6.9  
Price to earnings ratio (x)*         33.1  
*(trailing 12 months)

What has driven performance in 2QFY08?
  • Bajaj Hindustan reported a 5% YoY decline in sales for 2QFY08. While sales of the sugar division fell by 7.3% YoY, the distillery segment grew by 106% YoY. Power earned revenues of Rs 814 m. The power division was not operational last year and hence the results are not comparable. On account of the overall sugar sector still looking bleak, performance of the sugar division continued to get affected. However in recent times, while the sugar realisations have moved upwards, this is still lower than last year. On a half year basis, total sales were up 4% YoY. The distillery and power division were yet again the growth drivers.

    Segment wise performance
    (Rs m) 2QFY07 2QFY08 Change 1HFY07 1HFY08 Change
    Sugar 5,016 4,651 -7.3% 7,757 7,525 -3.0%
    % of total revenues 94% 76%   93% 74%  
    Distillery 337 695 106.4% 596 1,425 139.0%
    % of total revenues 6% 11%   7% 14%  
    Power - 814   - 1,169  
    % of total revenues   13.2%     11.6%  
    Revenues 5,353 6,160 15.1% 8,353 10,119 21.1%
    less intersegment 214 1,258 488.2% 347 1,777 411.5%
    Total revenues 5,139 4,903 -4.6% 8,006 8,342 4.2%

  • The company’s margins improved by 13% YoY and 15% YoY for 2QFY08 and 1HFY08 respectively. While labour and other expenses (as percentage of sales) increased, lower raw material costs aided the margin improvement. During the current quarter and six months period, the company accounted for sugar cane purchases for the season 2007-08 at a rate of Rs 110 per quintal based on an interim order dated November 15, 2007 of the Lucknow Bench of Hon'ble High Court of Allahabad. This is in comparison to the Rs 125 per quintal paid last year. Hence, the raw material prices are lower this quarter. However, necessary adjustments, if any, will be considered as and when the matter is finally decided. While PBIT margins of the sugar segment improved marginally, it was the power division, which showed robust performance. The PBIT margins of the power division for the quarter stood at 77%. The distillery segment reported 12% and 24% PBIT margins for 2QFY08 and 1HFY08 respectively.

  • Higher operating margins coupled with lower interest costs aided the superlative growth in the bottomline, which was up 1082% YoY in the quarter. However, lower other income and higher tax expenses capped any further growth.

What to expect?
At the current price of Rs 228, the stock is trading at 33.1 times its 12 month trailing earnings. Like its peers, the company’s sugar division continues to face pressure. The company, along with its subsidiary, has 136,000 TCD of sugar crushing capacity and 800 KLPD of distillery capacity. It plans no further expansion in these segments in the coming future. On the power front, it has 90 MW of cogen power and is expanding it to 105 MW saleable power in the coming quarters. Also, the production of its Medium Density Fibre Board (MDF) and Particle Board (PB) from bagasse has started from February 2008. The management is bullish on the segment and expects it to be highly profitable. The company is making attempts to reduce its dependence on the sugar division, which is a positive sign. But with sugar still being the major revenue earner, until the decision on the raw material prices is settled, its performance will continued to get affected.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BALRAMPUR CHINI SHARE PRICE


Sep 26, 2018 (Close)

TRACK BALRAMPUR CHINI

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

MORE ON BALRAMPUR CHINI

BALRAMPUR CHINI - BANNARI AMMAN COMPARISON

COMPARE BALRAMPUR CHINI WITH

MARKET STATS