PNB Gilts: No surprises in 1Q - Views on News from Equitymaster

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PNB Gilts: No surprises in 1Q

Jul 11, 2001

PNB Gilts has reported an astounding growth in profits in 1QFY02. The company's profit has increased to Rs 290 m from Rs 4.8 m in 1QFY01. However, compared to 4QFY01 profits have actually declined by 13%.

(Rs m)4QFY011QFY02Change
Interest Income 833 618 -25.7%
Other Income 1 3 129.8%
Interest Expenditure272159-41.6%
Operating Profit (EBDIT) 561 460 -18.1%
Operating Profit Margin (%)67.4%74.4% 
Other Expenditure 14 11 -18.4%
Profit before Tax548452-17.7%
Depreciation11-21.8%
Tax215161-25.2%
Profit after Tax/(Loss) 332 290 -12.8%
Net profit margin (%)39.9%46.8% 
No. of Shares (eoy) 135 135  
Diluted Earnings per share*9.88.6 
P/E (at current price) 2.1 
*(annualised)   

The company's financials are not comparable with 1QFY01, as it was an extraordinary quarter for the company. The company's financials took a hit in first quarter of last fiscal year due to rise in interest rates, consequently higher provision for depreciation in value of investments. We have compared the 4QFY01 with the current quarter as the interest rate scenario was similar in both these quarters.

The softening interest rate scenario enabled the company to improve its operating margins to 74% from 67% in the previous quarter. Lower depreciation and other expenses fueled the net margins to 47%. Net profits however, declined by 13% due to 26% drop in interest income.

PNB Gilts has a share of 7% in the Rs 10 trillion debt market and aims to increase the share further to 10% in the coming quarters. Amongst the new initiatives proposed by the company are, its plans to use derivatives as hedging products, diversification of product portfolio to include non-government securities and expansion of network for retailing government securities.

At the current market price of Rs 18, PNB Gilts is trading at a P/E of 2x and Price/Book value ratio of 0.7x 1QFY02 annualised earnings. The company's financials vary according to interest rate scenario. If the rates were to move up from the current levels, the company may have to make higher provision for depreciation in the value of investments.

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