Carrier: Tumbling margins - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Carrier: Tumbling margins

Jun 21, 2001

Carrier Aircon, the Indian subsidiary of the US air conditioner major, reported a sharp 20.6% growth in sales for the first nine months of FY01. The company is set to announce its full year results early next week. Carrier postponed its full year results from June 8, 2001 due to the recent move by its parent company to acquire a 100% stake in the Indian subsidiary.

(% growth) 1QFY01 2QFY01 3QFY01 9mFY01
Sales 20.2% 25.3% 16.7% 20.6%
OPM (%) 9.9% 4.7% 4.9% 7.0%
Net profit 26.8% -41.2% 16.1% -1.0%

Though the sales growth in the first nine months of the current year is above our projected growth levels, at the operating levels, Carrier has taken a big hit in both the second and third quarter. To put things in perspective, operating margins showed an improvement from 9.5% in 1QFY00 to 9.9% in 1QFY01. This was a creditable performance given the fact that first quarter tends to be the peak season for air conditioner companies (summer season).

However, in the second quarter, margins witnessed a sharp erosion from 6.7% in 2QFY00 to 4.7% in 2QFY01. The same holds true in the third quarter also, when margins declined from 5.0% in 3QFY00 to 4.9% in 3QFY01. As a result, margins at the operating level in the first nine months of FY01 dropped by 40 basis points.

We expect similar trends in 4QFY01 also, given the slow down in the economy. This is apparent from the industry production figures for FY01. Air conditioner production has slipped 3,400 units in March 2000 to around 2,900 units in March 2001. This could also be because of production cutbacks on account of rising inventory. With industrial slow down, companies have stalled their expansion (this is also a key growth driver for air conditioner industry). As a result, sales growth is expected to be on the lower side when compared with the first three quarters of FY01.

Meanwhile, the parent company, Carrier, has received the go-ahead from Foreign Investment Promotion Board (FIPB) for infusion of 100% equity in its Indian subsidiary (estimated at Rs 1.1 bn).

The scrip is currently trading at Rs 97 at a P/E mutliple of 10.7x the annualised nine months earnings.

Equitymaster requests your view! Post a comment on "Carrier: Tumbling margins". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

An India Revival Stock I'm Bullish On... (Profit Hunter)

Apr 9, 2021

This could take India to the position of 3rd largest economy.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

A Unique Sector for Short-Term Profits (Fast Profits Daily)

Apr 12, 2021

This ignored sector could deliver big short-term profits.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 16, 2021 (Close)