Nirma: Bottomline blues - Views on News from Equitymaster

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

  • MyStocks


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

Nirma: Bottomline blues

May 18, 2001

Nirma is set to declare its results today. While the FMCG sector as a whole struggled to show even single digit topline growth in FY01, Nirma's nine month period ended December 2000 clocked a 47% growth in topline. Its operating margins saw a hefty 1060 basis points growth.

(Rs m) 9m FY00 9m FY01 Change
Sales Turnover 10,600 15,592 47.1%
Other Income 254 85 -66.5%
Total expenditure 8,279 10,527 27.2%
Operating Profit (EBDIT) 2,321 5,065 118.2%
Operating Profit Margin (%) 21.9% 32.5%  
Interest 155 731 371.6%
Depreciation 242 997 312.0%
Profit before Tax 2,181 2,197 0.7%
Tax 251 183 -27.1%
Profit after Tax/(Loss) 1,930 2,014 4.4%
Net profit margin (%) 18.2% 12.9%  
No. of Shares (eoy) (m) 59.8 59.8  
No. of Shares (eoy) (m) 33.9 79.4  
Diluted number of shares (m) 79.4 79.4  
Diluted earnings per share* 32.4 33.8  
Current P/e ratio   12.4  

Nirma manufactures and sells detergents (cakes and powders), soaps, soap intermediates (alfa olefin sulphonate- AOS). A pioneer in introducing low-cost detergents through low-cost inputs and low overheads (production in the unorganised sector), it has by passed MNCs like HLL, P&G to become the market leader (in terms of volumes) in this price-sensitive industry. In value terms, Nirma holds 16% market share in the branded detergents segment.

Nirma has consistently improved both its topline and bottomline year after year. In fact, its turnover has spurted at a compounded annual growth rate (CAGR) of 21% in the last three years. Its net profits have grown at a CAGR of 24%, underlining the companyís consistency in perform. Compared to this its biggest rival, Hindustan Leverís (HLL) turnover has grown at CAGR of 14% during the same period. Its profits however, have grown at an impressive rate of 35%.

In the nine month period FY01, Nirma has been hit by rising interest and depreciation costs. The company's net profit has grown by a mere 4% during the period. This has affected the company's valuations. The stock has nearly halved since January this year.

While the company's backward integration into manufacturing linear alkyl benzene and N-Paraffin (both raw materials) has helped it control costs to gain an edge in this price sensitive sector, it has also meant ballooning interest and depreciation costs. The backward integration looks positive for the company in the long term given its 'value for money' business motto.

If Nirma continues its blazing turnover growth, the company is likely to be back on the growth track in bottomline terms sooner rather than later.

At the current market price of Rs 421, the stock trades at a P/E multiple of 12.4x its annualised nine month FY01 earnings.

Equitymaster requests your view! Post a comment on "Nirma: Bottomline blues". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Mar 23, 2011 (Close)


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