Aksh Optifibre: On the growth path

Aksh Optifibre continues to be on the growth path. The company has followed up on the strong fiscal performance with similar quarterly achievements. Bearing in mind, however, the company is in the initial stages of growth and is operating on a small base.

(Rs m)	1QFY01	1QFY02	Change
Net Sales	214	599	180.5%
Other Income	0	3	2232.3%
Expenditure	199	454	127.9%
Operating Profit (EBDIT)	15	145	901.8%
Operating Profit Margin (%)	6.8%	24.3%
Interest	8	5	-37.5%
Depreciation	4	10	173.1%
Profit before Tax	3	134	4133.6%
Tax	-	33
Profit after Tax/(Loss)	3	100	3076.3%
Net profit margin (%)	1.5%	16.7%
No. of Shares (eoy) (m)	14.4	22.0
Diluted earnings per share*	0.6	18.2
P / E ratio		5.6
* annualised

Sales of the company reported a growth of 42.3% for fiscal '01 and have jumped considerably in 1QFY02 to 180.5%. However, the global telecom meltdown has enveloped the company. Aksh has reported that export contracts of optic fibre cable (OFC) amounting to Rs 8 bn ($170 m) have been held up. A decision is yet to be made on the Bharat Sanchar Nigam Ltd. (BSNL) tender amounting to Rs 800 m. Also, the equipment supplier for preform technology, Optec Germany, has filed for bankruptcy. Consequently, Aksh has shelved plans for the preform project.

Operating profits have zoomed, lifted largely by the sharp rise in OPM and strong revenue growth. OPM of the company has increased by 17.5 percentage points. This is more a reflection of business operations stabilising and the company achieving higher utilisation of facilities leading to economies in scale. Sterlite Optical earns operating margins in the region of 40% to 50%, which could indicate room for augmenting margins. Sterlite Optical, however, is an integrated player and to that extent its margins could be higher. In FY01, Aksh reported an OPM of 16.4%.

At Rs 101 the company trades on a multiple of 5.6x 1QFY02 annualised earnings. Valuations of telecom equipment companies have come under sever pressure over the last 12 months with telcos cutting back on network expansion to pay for 3G licenses. Aksh was trading on a multiple of 10.5x FY01 earnings. Sterlite Optical, currently is trading on a P/E ratio of 4.1x on 9 m annualised earnings.