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Tisco: Stellar performance - Views on News from Equitymaster
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  • Jul 23, 2002

    Tisco: Stellar performance

    Tisco has reported a splendid performance for the quarter ended June 2002. The company's sales grew in double digits by 16% and net profits jumped by over 200%. Operating efficiencies, higher realisations and debt restructuring helped the company in strengthening its financial performance.

    (Rs m) 1QFY02 1QFY03 Change
    Net sales 14,046 16,236 15.6%
    Other Income 59 110 86.2%
    Expenditure 10,948 12,850 17.4%
    Operating Profit (EBDIT) 3,099 3,386 9.3%
    Operating Profit Margin (%) 22.1% 20.9%  
    Interest 1,146 800 -30.1%
    Depreciation 1,356 1,352 -0.4%
    Profit before Tax 656 1,344 105.0%
    Extraordinary items (448) (610) 36.3%
    Tax 3 75 2677.8%
    Profit after Tax/(Loss) 205 659 221.1%
    Net profit margin (%) 1.5% 4.1%  
    No. of Shares (m) 368.0 368.0  
    Diluted Earnings per share* 2.2 7.2  
    * (annualised)   18.1  

    During the quarter, the company's volume sales increased by over 12% to 0.8 m tonnes. The growth was largely led by over 90% jump in volume sales of cold rolled products (0.3 m tonnes). Enrichment of product mix supported the company's revenue growth. During the quarter the company gained a commendable 6% market share in CR products at 27% from 21% in FY02. Higher prices and increasing demand further supported the company's revenue growth.

    Dip in operating margins in 1QFY03 was on account of huge inventory build up in the comparable previous quarter. Raw material inventory levels have been reduced to normal levels in the June quarter and the company's operating margins at 21% are comparable to its margins in 1QFY01. Operating efficiencies in consumption of power cost, employee cost and freight charges helped Tisco in achieving its normal margins.

    Operating expenses break-up
    (Rs m) 1QFY02 1QFY03 Change
    (Increase)/decrease in stock (2,357) (670) -71.6%
    Raw material consumption 3,517 3,614 2.8%
    Staff cost 2,492 2,730 9.6%
    Freight and handling 1,405 1,355 -3.5%
    Power and fuel 1,861 1,788 -3.9%
    Other expenses 4,030 4,032 0.1%
    Total 10,948 12,850 17.4%

    Tisco's pre tax profits doubled during the quarter, primarily on account of a steep 30% fall in interest cost and 86% rise in other income. With low interest rates, the company opted to restructure its existing debt which helped reduce overall interest cost. Extraordinary items include expenses on account of VRS. The company's initiatives in reducing the number of employees has improved it productivity. Staff cost accounted for 17% of revenues of the company as against 18% in the comparable previous quarter.

    At the current market price of Rs 130, Tisco is trading at a P/E of 18x 1QFY03 annulised earnings. The company is expected to report about 69% profit growth for the year ended March 2003. On FY03's projected earnings, Tisco is trading at a P/E of 14x. In the last five years, Tisco has traded in the average P/E range of 8-20 times.



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