Chennai Petro: Margins under pressure - Views on News from Equitymaster

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Chennai Petro: Margins under pressure

Jun 1, 2001

Chennai Petroleum Corporation Ltd. (CPCL), the erstwhile Madras Refineries Ltd., has announced satisfactory topline growth for 4QFY01. During the previous fiscal the Government divested its entire 51.8% stake in the company in favour of Indian Oil Corp. (IOC).

(Rs m) 4QFY00 4QFY01 Change
Sales 16,563 18,982 14.6%
Other Income 128 324 153.1%
Expenditure 15,831 18,461 16.6%
Operating Profit (EBDIT) 733 521 -29.0%
Operating Profit Margin (%) 4.4% 2.7%
Interest (64) 319
Depreciation 127 256 101.1%
Profit before Tax 798 270 -66.2%
Tax 150 (111)
Profit after Tax/(Loss) 648 381 -41.2%
Net profit margin (%) 3.9% 2.0%
No. of Shares (m) 147.1 149.0
Diluted Earnings per share* 17.4 10.2
P/E Ratio 3.1
*(annualised)

The stake was purchased by IOC for Rs 65.9 / share, a premium of 82.6% to the prevailing market price at time of announcement. The marginal increase in share capital is on account subscription by National Iranian Oil Company (NIOC) to the private placement offer made earlier. NIOC continues to remain as one of the original promoters of the company.

Operating profits have declined significantly. This could be due to the costs rising at a faster clip as compared to sales. Also, the OPM has come under severe pressure declining by 170 basis points in the concerned period. The drop in OPM could be a concerning factor as oil prices did soften in 4QFY01 and may not be significantly higher than prices prevailing in the same quarter of FY00.

At Rs 31 the company trades on a multiple of 3.1x 4QFY01 earnings.

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