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Ess Dee Aluminium: Demand boosts sales - Views on News from Equitymaster
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Ess Dee Aluminium: Demand boosts sales
Jun 11, 2011

Ess Dee Aluminium Limited has announced its results for financial year 2010-2011 (FY11). The company has reported a 15.7% YoY and 165.4% YoY growth in sales and net profit respectively. Here is our analysis of the results.

Performance summary
  • Consolidated sales for FY11 grew by a robust 15.7% YoY largely aided by its standalone business.
  • Operating (EBITDA) margin fell by 1.7% to 25.1% during the year on the back of higher raw material costs as a percentage of sales.
  • Net profit of the company grew by 165.4% YoY aided by absence of extraordinary loss arising on account of merger in FY09

Consolidated financial picture
(Rsm) FY10 FY11 Change
Net sales 5,885 6,807 15.7%
Expenditure 4,308 5,101 18.4%
Operating profit 1,576 1,706 8.2%
Operating margins (%) 26.8% 25.1%  
Other Income 140 157 12.1%
Interest (net) 200 221 10.5%
Depreciation 174 203 16.5%
Reversal of impairment of assets 16 103  
Profit before Tax 1,358 1,542 13.5%
Extraordinary item - -  
Tax ††(574) 362  
Minority interest - -  
Loss after Tax on account of merger (1,488) -  
Profit after Tax/(Loss) 445 1,180 165.4%
Net profit margin (%) 7.6% 17.3%  
No. of Shares (m) 28 32  
Diluted earnings per share (Rs)*   36.8  
Price to earnings ratio (x)*   11.2  
* trailing twelve month earnings

What has driven performance in FY11?
  • Top line of the company expanded, mainly driven by standalone sales. Standalone sales which make up 95% of Ess Dee Aluminiumís consolidated sales grew by 20% YoY. The increase in sales of the company can be attributed to increase in domestic demand.

    Cost break-up...
    (Rs m) FY10 FY11 Change
    Raw materials 3,788 4,551 20.1%
    % sales 64.4% 66.9%  
    Staff cost 244 270 10.8%
    % sales 4.1% 4.0%  
    Other expenditure 277 280 1.4%
    % sales 4.7% 4.1%  

  • Operating income grew by 8.2% YoY during the year. This was slower than top line growth and was a result of sharp increase in raw material costs. Raw material costs for the year grew by 20.1% YoY. However, slower than top line growth in staff costs and in other expenditure helped provide support to operating income. Staff costs grew by 10.8% YoY while other expenditure grew by 1.4% YoY during the year.

  • The company's net profit increased by 165% YoY during the year as a result of absence of onetime loss in FY09 on account of merger. When adjusted for this loss, the bottom line fell by 39% YoY during the year.

What we expect?
At a price of Rs 413, the stock is trading at 5.2 times our estimated FY13 earnings. The company has benefitted from growth in Pharma and FMCG sectors, while the acquisition of IFL has contributed to the company's 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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