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GTL: Other income takes toll - Views on News from Equitymaster
 
 
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  • Jul 29, 2002

    GTL: Other income takes toll

    GTL Limited (erstwhile Global Tele Systems) has posted a 5% sequential decline in revenues for 1QFY03. The drop in net profits is significantly higher at 32%. However, this is due to a steep decline in other income and a tax reversal that inflated profits for 4QFY02.

    (Rs m) 4QFY02 1QFY02 Change
    Sales 1,369 1,302 -4.9%
    Other Income 92 46 -49.6%
    Expenditure 951 897 -5.7%
    Operating Profit (EBDIT) 418 405 -3.1%
    Operating Profit Margin (%) 30.6% 31.1%  
    Interest - -  
    Depreciation 226 237 4.9%
    Profit before Tax 284 214 -24.5%
    Tax (32) 0 -100.3%
    Profit after Tax/(Loss) 316 214 -32.1%
    Net profit margin (%) 23.0% 16.5%  
    Diluted number of shares 70.7 70.7  
    Diluted Earnings per share* 17.8 12.1  
    P/E (x)   7.5  
    *(annualised)      

    On a YoY basis, the performance looks much better; revenues are up 10%. However, a steep 70% drop in other income has caused the net profit figure to be lower by 21%. The decline in other income is due to absence of an Income Tax refund of amounting to Rs 54 m in 1QFY02. A drop in interest income and forex gains also contributed to the decline. The operating margins have also improved sharply as compared to 1QFY02. This improvement in operating margins is due to lower ESOP (employee stock option) costs and a drop in staff costs. Employee costs have declined by 18% on a YoY basis and the ESOP expenses are down by 96%.

    Rs m 1QFY02 1QFY03 Change
    Network engineering (NE) 170 14.4% 388 29.8% 128.0%
    Customer management solutions (CMS) 148 12.5% 229 17.6% 54.4%
    Enterprise solutions (ES) 860 72.8% 686 52.7% -20.3%
    Others 3 0.2% 0 0.0% -96.3%
    Total 1,181 100.0% 1,302 100.0% 10.3%

    The topline growth came from the company’s network engineering (NE) and customer management solutions (call centre) businesses. However, the enterprise solutions (ES) business saw a steep fall in revenues of 20%. The ES offerings include offering Internet connectivity and e-business related infrastructure to corporates.

    At the current market price of Rs 90, the stock is trading at a P/E multiple of 8x its 1QFY03 annualised earnings. The while the performance is better compared to the past few quarters, it will take sometime before a clear trend emerges. The stock price, therefore, could be range bound going forward.

     

     

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