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Pratibha Inds: Execution uptick boost's growth - Views on News from Equitymaster
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Pratibha Inds: Execution uptick boost's growth
May 24, 2011

Pratibha Industries has announced the fourth quarter financial results of financial year 2010-11 (4QFY11). The company has reported 29.5% YoY and 31.0% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 29.5% YoY during 4QFY11. Revenue growth was led by 14.9% YoY and 10.3% YoY growth in the Infrastructure & Construction (I&C) and Manufacturing segments respectively. Revenue growth from I&C segment was propelled by pick up in execution across key projects.
  • Operating profits increased 5.0% YoY during 4QFY11.
  • Net profits increased 31.0% YoY due to decline in interest expenses and taxes.
  • At the end of 31 March 2011, the order book of the company stood at Rs 36.2 bn
  • The company declared a final dividend of Rs 0.4 per share. This, along with the interim dividend paid in March (Rs 0.2) takes the total dividend per share to Rs 0.6.

Consolidated financial snapshot
(Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
Sales 3,002 3,887 29.5% 10,072 12,681 25.9%
Other operating income 23 10 -55.5% 63 45 -27.6%
Expenditure 2,548 3,396 33.3% 8705 10961 25.9%
Operating profit (EBDITA) 477 501 5.0% 1,429 1,766 23.6%
Operating profit margin (%) 15.8% 12.8%   14.1% 13.9%  
Other income 0 12   0 13  
Interest 147 127 -13.7% 522 641 22.8%
Depreciation 39 44 11.7% 140 170 21.2%
Profit before tax 290 342 17.7% 766 968 26.3%
Tax 81 68 -16.6% 201 254 26.0%
Profit after tax/(loss) 209 274 31.0% 565 714 26.4%
Net profit margin (%) 6.9% 7.0%   5.6% 5.6%  
No. of shares (m)         99.4  
Basic & diluted earnings per share (Rs)         7.2  
P/E ratio (x) *         7.4  
* On a trailing 12-months basis

What has driven performance in 4QFY11?
  • Net sales increased 29.5% YoY in 4QFY11 led by strong execution. Revenues from the infrastructure & construction segment increased 14.9% YoY while revenues from the saw pipe manufacturing segment increased 10.3% YoY during the quarter.

    Segmental Break up
    (Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
    Infrastructure & Construction 3,372 3,875 14.9% 10844 13882 28.0%
    Manufacturing 490 541 10.3% 1827 1339 -26.7%
    Unallocated 0 11   0 13  
    *Excluding inter-segmental sales

  • Operating profits increased 5.0% YoY in 4QFY11. However, operating margins fell from 15.8% in 4QFY10 to 12.8% in 4QFY11 on the back of increase in operating expenses as a percentage of revenues. Operating expenses increased to 87.2% (as a percentage of revenues) in 4QFY11 from 84.2% in 4QFY10.

  • Bottom line registered 31.0% YoY growth due to fall in interest expenses and taxes. Interest expenses declined 13.7% YoY while the tax expenses declined 16.6% YoY. Interest cost declined due to the recent QIP and preferential offering (funds used to pay off the high cost debt).

What to expect?
At the current price of Rs 52, the stock trades at 4.7 times our estimated FY13 earnings. As of 31 March 2011 the order book of the company stood at Rs 36.2 bn. In addition, the company is also lowest bidder in orders worth Rs 11 bn. By the end of the fiscal, management expects the order book to be at Rs 55 bn. Based on improved order pipeline management expects revenue growth to be in the region of 25% for FY12. Thus, considering the strong growth prospects and attractive valuations we maintain our view on the stock.

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