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Emco: Maintains strong momentum - Views on News from Equitymaster

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Emco: Maintains strong momentum

May 28, 2008

Performance summary
  • Topline grows 44% YoY in FY08, 36% YoY in 4QFY08. Actual sales figure 3% higher than our estimates.
  • Operating margins expand by 0.5% YoY during the fiscal. Improvement largely aided by stock related adjustments as raw material costs increase from 79% of sales in FY07 to 81.6% in FY08.

  • Net profits grow by 59% YoY during the fiscal, largely aided by expansion in operating margins. Actual profit figure 11% higher than our estimates.

  • Board recommends dividend of Rs 1.4 per share (dividend yield of 0.8%).

Financial performance snapshot
(Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change
Sales 2,517 3,422 36.0% 6,559 9,443 44.0%
Expenditure 2,198 2,935 33.6% 5,693 8,150 43.2%
Operating profit (EBDITA) 319 487 52.6% 866 1,292 49.3%
Operating profit margin (%) 12.7% 14.2%   13.2% 13.7%  
Other income 1 1 -20.7% 1 1 -20.7%
Interest 88 45 -49.2% 198 240 21.3%
Depreciation 15 38 149.5% 60 98 63.6%
Profit before tax 217 405 86.5% 609 955 56.8%
Extraordinary income/(expense) - (3)   - (3)  
Tax 72 114 58.3% 203 308 51.4%
Profit after tax/(loss) 145 288 98.2% 406 644 58.7%
Net profit margin (%) 5.8% 8.4%   6.2% 6.8%  
No. of shares       51.0 58.8  
Diluted earnings per share (Rs)       6.9 11.0  
P/E ratio (x)         15.7  

What to expect?
At the current price of Rs 172, the stock is trading at a multiple of 9.3 times our estimated FY10 earnings. We shall update this analysis post receipt of further details from the company.

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