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BPL: Weakening profitability - Views on News from Equitymaster
 
 
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  • Jun 18, 2001

    BPL: Weakening profitability

    BPL Limited, the consumer electronics major, has reported a sharp 34.8% drop in net profits to Rs 195 m in 4QFY01. This is on the back of a 12.7% decline in sales to Rs 4,183 m. One of the key reasons for the drop in sales is the transfer of some of businesses to the associate BPL Group companies.

    (Rs m) FY00 FY01 Change 4QFY00 4QFY01 change
    Sales 18,506 17,018 -8.0% 4,794 4,183 -12.7%
    Other Income 3 30 913.3% 3 31 920.0%
    Expenditure 16,576 15,309 -7.6% 4,240 3,681 -13.2%
    Operating Profit (EBDIT) 1,930 1,709 -11.5% 554 502 -9.4%
    Operating Profit Margin (%) 10.4% 10.0%   11.6% 12.0%  
    Interest 485 519 7.0% 150 206 37.3%
    Depreciation 260 319 22.7% 81 97 19.1%
    Profit before Tax 1,188 902 -24.1% 326 230 -29.5%
    Tax 117 90 -23.1% 27 35 29.6%
    Profit after Tax/(Loss) 1,071 812 -24.2% 299 195 -34.8%
    Net profit margin (%) 5.8% 4.8%   6.2% 4.7%  
    No. of Shares (eoy) (m) 27.7 27.7   27.7 27.7  
    Diluted number of shares 27.7 27.7   27.7 27.7  
    Earnings per share (Rs) 38.7 29.3   43.2 28.1  

    Turnover in FY00 includes the sale of audios, dry batteries and export of colour monitors, which are now being sold by its associate companies. Operating margins in 4QFY01, however, has gone up from 11.6% to 12.0% due to a 13.2% fall in expenses. Nonetheless, higher interest, depreciation and tax outflow have pulled down profits by 34.8% in 4QFY01.

    The fall in operating margin for FY01 is lower despite adverse market conditions and subdued demand scenario. This is primarily on account of a 7.5% fall in raw material costs that accounted for almost 80% of FY00 expenses. Selling and manufacturing expenses have also declined by 11.2% in FY01. Though expenses have come down by 7.6%, sales has fallen by 8.0%. As a result, operating margin has taken a hit by 40 basis points.

    As per the recent ORG-Marg survey, though the CTV sales for the first four months of the current year (i.e. Jan-April 2001) has gone up by 4%, BPL's market share has declined to around 18% from 19%. On the other hand, the Korean multinational, Samsung, has extended its market share to around 7%. We expect similar trend to continue in FY02 also, in light of lacklustre economy and threats of cheaper imports.

    The scrip is currently trading at Rs 61 at a P/E mutliple of 2.1x the FY01 earnings. The company has recommended a dividend fo Rs 2.5% in FY01, which works out to a dividend yield of 4%. The dividend payout has come down drastically from 30% in FY00 to just 8% in FY01.

     

     

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