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Voltas net vaults 260% backed by healthy order book - Views on News from Equitymaster
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  • Jul 25, 2000

    Voltas net vaults 260% backed by healthy order book

    Voltas limited has posted a 260% jump in net profit on a turnover growth of 10% for the first quarter ended FY01. The operating margins were better, up from 3.9% in 1QFY00 to 4.7% in 1QFY01. The reduction in interest cost by 30% has boosted the net profit margin to 2.2% (0.1% in 1QFY01). Other adjustments here include the voluntary retirement scheme amortization expenses.

    (Rs m) 1QFY00 1QFY01 Change
    Sales 2,146 2,355 9.7%
    Other Income 21.0 23.1 10.0%
    Expenditure 2,062 2,244 8.8%
    Operating Profit (EBDIT) 84 111 31.8%
    Operating Profit Margin (%) 3.9% 4.7%  
    Interest 59 42 -29.2%
    Depreciation 36 37 3.1%
    Profit before Tax 11 56 416.7%
    Other Adjustments (8) (46) 484.6%
    Tax 1 3 200.0%
    Profit after Tax/(Loss) 2.0 7.2 260.0%
    Net profit margin (%) 0.1% 2.2%  
    No. of Shares (eoy) (m) 33.1 33.1  
    Diluted number of shares 33.1 33.1  
    Diluted Earnings per share* 0.2 0.9  

    The company recently bagged the order worth Rs 9 bn from LG Electronics, the Korean multinational, for supplying 1.2 m refrigerators in three years under the 3 year Original Equipment Manufacturer (OEM) agreement. The company has already supplied over 0.2 m refrigerators to LG in the last 2 years. This order is expected to increase the unit production capacity of the company by 77%. With additional orders from Amul for supplying 110ml capacity visi-coolers, the company is sitting on a healthy order book (Voltas also supplies to other multinationals like Pepsi, Nestle, UB Group and Cadbury).

    Voltas is also exiting from the other non-core divisions like steel furniture, textile machinery and material handling businesses, with focus primarily on air-conditioning and refrigeration businesses. Last year the company hived off its chemical plant at Patancheru. This order book situation along with the general buoyant consumer spending should act as a catalysts for topline growth in the coming years.

    The stock is currently trading at Rs 35 at a P/E multiple of 40.1x on annualised first quarter FY01 earnings.



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