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Ess Dee Aluminium: Acquisition aids top line - Views on News from Equitymaster
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Ess Dee Aluminium: Acquisition aids top line
May 27, 2010

Ess Dee Aluminum Limited has announced its FY10 results. The company has reported a 30.3% YoY growth in sales and a profit at net level. Here is our analysis of the results.

Performance summary
  • Consolidated sales for FY10 grew by a robust 30% YoY largely aided by IFL sales.
  • Operating (EBITDA) margin expanded by 25.2% to 26.8% during the quarter aided by lower raw material costs as a percentage of sales as well as absence of provisions for indirect tax and impairment expenditure during the year.
  • The company turned in a net profit of Rs 1 bn during the year as compared to a loss of Rs 240 m in FY09. This performance was aided by increase in operating income and higher other income.


Consolidated financial picture
(Rs m) FY09 FY10 Change
Net sales 4,515 5,885 30.3%
Expenditure 4,443 4,308 -3.0%
Operating profit 72 1,576 2095.2%
Operating margins (%) 1.6% 26.8%  
Other Income 44 140 217.1%
Interest (net) 153 200 30.3%
Depreciation 104 174 67.7%
Reversal of Impairment of assets   16  
Profit before Tax (141) 1,358  
Extraordinary item -†† -††  
Tax 256 338 31.8%
Minority interest 158 3 -98.1%
Profit after Tax/(Loss) (240) 1,023  
Net profit margin (%) -5.3% 17.4%  
No. of Shares (m) 28 28  
Diluted earnings per share (Rs)*   36.8  
Price to earnings ratio (x)*   13  

What What has driven performance in FY10?
  • Top line of the company expanded mainly driven by IFL sales while the standalone sales grew by 16% YoY. The standalone revenue makes up 79% of Ess Dee Aluminiumís consolidated sales. The increase in sales of the company can be attributed to increase in domestic outsourcing due to lower bulk exports as a result of economic slowdown

    Cost break-up...
    (Rs m) FY09 FY10 Change
    Raw materials 2,997 3,788 26.4%
    % sales 66.4% 64.4%  
    Staff cost 147 244 65.9%
    % sales 3.3% 4.1%  
    Other expenditure 200 277 38.2%
    % sales 4.4% 4.7%  

  • Operating income grew by a spectacular 2,095% YoY during the year. In other words, it witnessed a near 22-fold jump. This jump was aided by higher sales as well as a fall in raw material costs. Provision for indirect taxes as well as for impairment was made in FY09. The absence of these onetime expenses also helped boost operating income. However, the operating income was capped by higher staff costs. Staff costs during the year increased by 66%.

  • The company turned in a net profit during the year as a result of higher operating income as well as higher other income. Other income for the year increased by 217%.

What to expect?
At a price of Rs. 484 the stock is trading at 8 times our estimated FY12 earnings. The company has benefitted from growth in Pharma and FMCG sectors, while the acquisition of IFL has contributed to the companyís growth in the form of new capacities and tax breaks. Going forward, we expect the company to grow at a healthy rate.

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