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.
KRL: Margins make-up - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 13, 2002

    KRL: Margins make-up

    This is the fifth consecutive quarterly decline in turnover for Kochi Refineries Ltd (KRL). However, the industry has experienced a challenging environment over the same period. In FY02, industry crude throughput grew by 3.8% compared to 20.3% in the previous fiscal. At the topline, for the full year, KRL underperformed industry peer, Chennai Petroleum (CPCL).

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net sales 17,716 14,035 -20.8% 71,366 58,050 -18.7%
    Other Income 393 139 -64.5% 1,098 349 -68.2%
    Expenditure 17,301 13,075 -24.4% 69,326 54,960 -20.7%
    Operating Profit (EBDIT) 416 960 131.1% 2,041 3,090 51.4%
    Operating Profit Margin (%) 2.3% 6.8%   2.9% 5.3%  
    Interest 269 245 -9.1% 1,099 1,148 4.4%
    Depreciation 265 289 9.1% 1,015 1,105 8.9%
    Profit before Tax 275 566 106.0% 1,025 1,186 15.7%
    Tax (132) 304   (70) 498  
    Profit after Tax/(Loss) 407 262 -35.7% 1,095 688 -37.2%
    Net profit margin (%) 2.3% 1.9%   1.5% 1.2%  
    No. of Shares 138.2 138.5   138.2 138.5  
    Diluted earnings per share* 11.7 7.6   7.9 5.0  
    P/E Ratio         12.0  

    Industrial slowdown over FY02 coupled with excess capacity of petroleum products has impacted industry operating rates. Also, international product prices softened with global economic downturn, which hit product realisations. Consequently, the industry and KRL had to cope with lower volumes and realisations. At the same time, reduced operating rates increases per unit cost, which could adversely impact operating margins. The underperformance in topline of KRL could be attributed largely to first quarter decline in turnover of 34% YoY. During 1QFY02, the company under-took planned shut down of 53 days, which lowered throughput by 35.4% YoY.

    For FY02, throughput of the company has fallen by 9.6% YoY to 6.8 m metric tonnes (MMT) reflected in lower capacity utilisation at 91%. Industry operating rates for FY02 was 95%. We estimate realisations are down 10%, salvaged to some extent by depreciation of the rupee. The company seems to have performed better in LPG and ATF, which reported 3.5% and 4.8% growth in production. Having said that, throughput in 2HFY02 has grown by 15% over 1HFY02, which could be early indications of revival in volumes.

    While sales have been sliding, operating margins of the company have improved in all the past four quarters. Performance at the operating level is driven by higher margins. Prices of crude oil, the largest constituent in operating cost, during FY02 were lower by an estimated 17.1% at $ 23.3/ barrel (Brent blend). The same is reflected in higher gross refining margins (GRMs) for the period, which increased to $2.4/ barrel compared to $1.6/ barrel in FY01. The lower throughput has also contributed to reduced raw material costs, which are down 21% YoY. The company entered into a long term employee compensation settlement with retrospective effect in 3QFY02 leading to a jump in staff costs.

    The company has indicated measures to maintain firm operating margins by focusing on higher quality products, reducing operating costs and modernising refining plant. Realisations on diesel could improve, as the company completes a project for reducing sulphur content. KRL had installed a diesel hydro-desluphurisation unit in FY00. Like peers in the industry, KRL seems to be setting up a crude oil desk to ensure more efficient procurement of feedstock. In an effort to reduce transportation costs, a single buoy mooring (SBM) is being built to provide for very large crude carriers (VLCC). To enhance LPG market share of BPCL in the south, KRL is setting up a 70,000 TPA LPG plant at a cost of Rs 180 m. The plant is expected to be commissioned in July '03.

    At Rs 60 the scrip is trading on a multiple of 12x FY02 earnings. Over the past 12 months the scrip has traded in a band of 4.5x - 9x earnings. Historically, the valuations have ranged between 3x-6x. The premium valuations could be due to the expected strategic disinvestment in BPCL. With change in management, the acquirer could be required to make an open offer to KRL shareholders, as per the SEBI takeover regulations.



    Equitymaster requests your view! Post a comment on "KRL: Margins make-up". 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.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    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