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Wartsila: Fluctuating fortunes - Views on News from Equitymaster
 
 
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  • May 15, 2001

    Wartsila: Fluctuating fortunes

    Today is hardly a day to comment on any stock's valuations when the bourses have dropped dramatically on Sebi's decision to ban carry forward. Instead lets focus on some information based on Wartsila India's annual report.

    Wartsila is an Indo-Finnish joint venture promoted by the Wartsila Group who has a 51% stake in the company. The company is India's largest manufacturer and supplier of 1 MW - 6 MW DG sets, which have the advantage of being able to adapt its engines to a variety of fuels. It has a market share of over 65% of the total genset production in India (> 1 MW range). Diesel Gensets (DG) of smaller size can be put together to make one large power generating unit.

    Wartsila has made a steady progress in the last five years. Since 1996 the company's cumulative delivery of power plants has increased at a CAGR of 18%. As of December 31, 2000 Wartsila's cumulative deliveries to India were 2084 MW, of which 1718 MW are in operation. The rest 366 MW are projects currently under execution.

    Though globally the Wartsila Group is a leading ship power supplier, in India its ship foray has just begun. In India, cement seems to be the key user industry for Wartsila (34% of all installed power plants). Textiles and chemical & fertilisers follow next.

    Wartsila India has posted a net profit of Rs 36 m for the quarter ended March 31, 2001, a huge 200% jump as compared to Rs 12 m it reported in the corresponding period last fiscal. Total Income for the quarter is up 49% as compared to the corresponding period in the previous fiscal.

    (Rs m) 1QFY01 1QFY02 Change
    Net Sales 565 854 51.2%
    Other Income 4 6 50.0%
    Expenditure 540 794 47.0%
    Operating Profit (EBDIT) 25 60 140.0%
    Operating Profit Margin (%) 4.4% 7.0%  
    Interest 3 2 -33.3%
    Depreciation 8 8 0.0%
    Profit before Tax 18 56 211.1%
    Tax 6 20 233.3%
    Profit after Tax/(Loss) 12 36 200.0%
    Net profit margin (%) 2.1% 4.2%  
    No. of Shares (eoy) (m) 12.0 12.0  
    Diluted Earnings per share* 4.0 12.0  
    (annualised)      
    Current P/e ratio   6.3  

    However, the company is not a very consistent performer. In FY01, for the first half of the year, the company's bottomline declined by a significant 43% YoY. But the company bounced back in the September ended quarter, 3QFY01, and recorded a huge 204% jump in bottomline. The company finally finished FY01 with a marginal 3% growth in bottomline and an 8% growth in topline.

    Added to that, the company's orderbook has shrunk. As on March 31, 2001 orders for power plants to be executed during the year were Rs 694 m, as against Rs 1,415 m on March 31, 2000.

    At Rs 76 the stock currently trades at a P/E multiple of 6.3 times its annualised 1QFY02 earnings. However, based on its FY01 earnings the stock trades at a P/E multiple of 13.7x.

     

     

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