Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Chennai Petroleum: The IOC effect - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 2, 2003

    Chennai Petroleum: The IOC effect

    Chennai Petroleum, the standalone refinery, has recently announced its fourth quarter and full year financial results for FY03. As we have noticed in recent times, most refineries have posted encouraging results for FY03 and have been one of the favorites on the bourses. Chennai Petroleum's performance is no exception. Let's take a look.

    (Rs m) 4QFY02 4QFY03 Change FY02 FY03 Change
    Net Sales 15,072 23,633 56.8% 60,477 80,552 33.2%
    Other Income 244 199 -18.4% 395 404 2.4%
    Expenditure 13,907 19,657 41.3% 57,911 73,989 27.8%
    Operating Profit (EBDIT) 1,165 3,976 241.3% 2,566 6,562 155.8%
    Operating Profit Margin (%) 7.7% 16.8%   4.2% 8.1%  
    Interest 336 211 -37.2% 1,281 1,067 -16.7%
    Depreciation 45 307 576.6% 790 1,020 29.1%
    Profit before Tax 1,028 3,657 255.8% 889 4,880 448.9%
    Tax 233 1,404 502.9% 252 1,851 635.0%
    Profit after Tax/(Loss) 795 2,253 183.5% 637 3,029 375.4%
    Net profit margin (%) 5.3% 9.5%   1.1% 3.8%  
    No. of Shares 149.0 149.0   149.0 149.0  
    Diluted Earnings per share* 21.3 60.5   4.3 20.3  
    P/E Ratio         2.8  

    In FY02 the topline of the company had declined by 13%. This was on account of slowdown observed across the globe and also due to softening crude prices. However in FY03, the company posted a 33% jump in topline backed by higher volumes and strengthening petroleum product prices. The pricing deregulation which happened last year, led to aligning of domestic petroleum product prices to international crude prices. Improvement in net sales was even higher in fourth quarter (up 56%).

    Operating margins of the company almost doubled in FY03. Though the expenses of the company grew by about 28%, the increase was slower as compared to the growth in the net sales. The things become clear when one looks at the raw material costs as a percentage of sales. The raw material cost, which accounts for about 94% of the expenses, has declined as a percentage of sales (see table). However, other expenses increased in FY03 on account of planned shut down of the refinery and the cracker in the second quarter of FY03.

    Cost as % of net sales 4QFY02 4QFY03 FY02 FY03
    Stock in trade 3.0% -3.0% -0.4% 2.2%
    Raw material 85.7% 81.4% 92.6% 90.0%
    Staff costs 1.0% 1.0% 1.1% 1.1%
    Other expenses 2.6% 3.7% 2.5% 3.0%

    Despite a significant 635% increase in tax provisioning, the doubling of operating margins insured bottomline growth by a huge 375% YoY. Chennai Petro managed to reduce the interest costs and this added to further upside in the bottomline. The increase in net profit is also on account of significant improvement in refining margins and also due to gains on the stocks in hand (on account of higher prevailing prices). About 75% of the net profit has been realized in fourth quarter alone.

    At Rs 56, the stock is trading at a P/E multiple of 2.8x FY03 earnings. The scrip usually trades within a brand of 3x-6x. Currently the scrip is trading on a lower P/E multiple. The board has recommended a dividend of about 35% for the year ended FY03 as compared to 20% last year. The company is a subsidiary of IOC, the leading player in the marketing segment and hence it is safe as far as its product sales are considered. With the crude expected to remain at a higher level of US$ 25, the company may further benefit going forward.



    Equitymaster requests your view! Post a comment on "Chennai Petroleum: The IOC effect". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Mahanagar Gas Ltd (IPO)

    Jun 21, 2016

    Should one subscribe to Mahanagar Gas IPO?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


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