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Aftek: Power but safe?

Jul 27, 2001

Aftek has ended its fiscal FY01, with an impressive growth of 127.2% in revenues and the rise in net profits was 192%. The company's growth comes from its product Powersafe, which the company started shipping from the 2QFY01 and the revenues started coming in from 3QFY01.

(Rs m) 3QFY01 4QFY01 Change FY00 FY01 Change
Sales 145 147 1.3% 198 449 127.2%
Other Income 9 8 -12.2% 10 35 229.7%
Expenditure 65 64 -0.7% 112 221 97.6%
Operating Profit (EBDIT) 81 83 2.9% 86 228 165.6%
Operating Profit Margin (%) 55.5% 56.4%   43.5% 50.8%  
Interest - -   1 -  
Depreciation 2 2 5.3% 6 8 32.9%
Profit before Tax 88 89 1.3% 89 254 184.4%
Tax 2 2 0.0% 5 8 54.3%
Profit after Tax/(Loss) 86 87 1.3% 85 247 191.9%
Net profit margin (%) 58.9% 58.9% 0.0% 42.8% 55.0%  
Diluted number of shares 6.0 6.0 0.0% 6.0 6.0  
Diluted Earnings per share* 57.1 57.8 1.3% 14.1 41.2 1.3%
*(annualised)   2     3  

For FY01 29% of Aftek's revenues came from software products, 62% came from its software business and the remaining came from embedded products. The contribution of products sales is low due to the facts that the revenues from products were realized only in the second half.

Aftek's operating margins improved significantly during FY01. This is due to products sales that is traditionally high margins business. Also, the company's employee costs are one of the lowest in the industry. The employee costs for FY01 was just 6% of the sales.

The growth of the company's software business for FY01 was approximately 40%.

For the 4QFY01, Aftek's performance was quite ordinary. The company recorded a 1.3% growth in topline (QoQ) and the rise in net profits was 1.3%. On a YoY basis revenues have grown by 184% and the bottomline has grown by 259%. The operating margin improved by 90 basis points on the back of increased contribution to revenues from products that went up from 43.8% in 3QFY01 to 46.3% 4QFY02. The products sales have shown a sequential growth of about 7%.

The software business of the company that contributed to 47.5% of the revenues in 4QFY01 (49.9% in 3QFY01) has shown a marginal decline of 3.4% for the second consecutive quarter.

At the current market price of Rs 112, the stock is trading at a P/E multiple of 3 times FY01 earnings. The stock has seen an upside due to the low valuations it has been quoting. However, the risk from the products business will continue to be a concern that will haunt the valuations. In the near term the stock might see some appreciation but its valuation could improve if it continues to perform steadily, which is yet to be seen from product based companies.


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