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Maharashtra Seamless: Operationally sound - Views on News from Equitymaster

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Maharashtra Seamless: Operationally sound
Jul 23, 2009

Performance summary
  • The topline of company grows by a robust 20.3%YoY during the quarter.
  • Operating margins remain nearly stable at 23.5% as operating costs grow in line with the topline growth.
  • Bottomline grows by 8.2%YoY, lower than topline and operating profits, mainly on account of fall in other income and higher taxes.


Standalone Financial snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 3,517 4,231 20.3%
Expenditure 2,687 3,237 20.5%
Operating profit (EBDITA) 830 993 19.7%
EBDITA margin (%) 23.6% 23.5%  
Other income 122 51 -58.3%
Interest (net) 12 12 2.6%
Depreciation 45 46 2.9%
Profit before tax 896 986 10.1%
Extraordinary items      
Tax 293 334 14.1%
Profit after tax/(loss) 603 652 8.2%
Net profit margin (%) 17.1% 15.4%  
No. of shares (m) 70.5 70.5  
Diluted earnings per share (Rs)*   36.6  
Price to earnings ratio (x)**   7.0  
(* annualised, ** on trailing twelve months earnings)

What has driven performance in 1QFY10?
  • The company managed to grow its topline by a robust 20.3% YoY as demand in the domestic markets remained upbeat with domestic oil companies continuing their ongoing projects and exploration and production activities. The revenues from steel pipes and tubes segment grew by around 20.3% YoY during the quarter. Currently the order book stands at around Rs 4 bn.

    Cost break-up…
    (Rs m) 1QFY09 1QFY10 Change
    Raw materials 2,055 2,562 24.6%
    % sales 58.4% 60.5%  
    Staff cost 50 57 14.1%
    % sales 1.4% 1.3%  
    Manufacturing expenses 476 487 2.5%
    % sales 13.5% 11.5%  
    Other expenditure 106 132 24.1%
    % sales 3.0% 3.1%  

  • On the operating front, operating costs grew nearly in line with the topline, thus EBITDA margins remained stable at 23.5% during the quarter. While raw materials costs (as % sales) grew, all other costs heads viz. staff cost, manufacturing expenses and other expenditure (as % sales) declined during the quarter.

  • Bottomline growth at 8.2%YoY comes in lower as compared to topline mainly on account of significant fall in other income and higher taxes during the quarter. However, lower interest cost and depreciation had a positive impact on the bottomline.

What to expect?
At the current price of Rs 257, the stock is trading at a multiple of 5x the company’s expected FY12 earnings estimates. We continue to remain positive on the stock.

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