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Pentasoft Tech's profits sky rocket in 1QFY00 - Views on News from Equitymaster

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Pentasoft Tech's profits sky rocket in 1QFY00

Jul 7, 2000

Pentasoft Technology has reported a YoY jump of 470% in its net profits to Rs 299 m in the 1QFY00 on the revenues of Rs 1.3 bn. During the year the company exported around 83% of its total revenues. The jump in the sales is mainly due to acquisition of the business software division of Pentamedia Graphics. The company's enterprise division has contributed 72%, engineering division 20% and education & training business 8%. Its engineering services comprising CAD (Computer Aided Design), GIS(Geographical Information System), embeded and process control alignment accounted for 20% of the total revenue. As a result the company enjoys more than 30% of the margins. However the company's operating profit margins declined to 31.5% in 1QFY00 from 33.4% in the corresponding previous period due to more than proportionate increase in the operating expenditure.

(Rs m) 1QFY99 1QFY00 Change
Sales 201 1,313 552.3%
Other Income 1 16 1912.5%
Expenditure 134 900 571.6%
Operating Profit (EBDIT) 67 413 513.7%
Operating Profit Margin (%) 33.4% 31.5%  
Interest - 2  
Depreciation 16 128 721.2%
Profit before Tax 53 299 469.5%
Tax 1 -  
Profit after Tax/(Loss) 52 299 476.1%
Net profit margin (%) 25.8% 22.8%  
Earnings per share 25.6 66.1  

During the year Pentasoft has taken several new initiatives. It has established a SDC (Software Development Centre) at Andhra Pradesh and taken up around 100,000 sq. ft. Tidel Park in Tamil Nadu. Its enterprise division has forged an alliance with global giants in CAD/CAM services for marketing of their software products. For the development of education and training division the company has opened 14 more franchise centres and 6 own centres. With this the company now has 135 franchise centres and 15 own centres.

At the current market price of Rs 375, Pentasoft Technology is trading at a P/E of 5.7 times its 1QFY00 annualised earnings. In the past three months the company has P/E in the range of 20-25 times. The initiatives taken by the company during the year might bring re-rating in the stock.


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