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Punjab Tractors: Steady performer

Jul 31, 2001

Punjab Tractors (PTL), India's second largest manufacturer of tractors has reported a net profit of Rs 254 m for 1QFY02, a growth of 2.8% YoY. The company's performance is commendable as all other tractor companies have reported a dismal performance in this quarter.This was driven by an increase in market share in a declining tractor market and an improvement in its operating margins.

(Rs m)1QFY011QFY02Change
Sales 2,490 2205-11.5%
Other Income 8 0-100.0%
Expenditure 2,101 1785-15.0%
Operating Profit (EBDIT) 389 420 7.9%
Operating Profit Margin (%)15.6%19.0%
Interest - 15-
Depreciation 44 452.3%
Profit before Tax3533602.0%
Other Adjustments--
Tax 106 1060.0%
Profit after Tax/(Loss) 247 254 2.8%
Net profit margin (%)9.9%11.5%
No. of Shares (eoy) (m) 20.3 60.9
Diluted number of shares 60.9 60.9
Diluted Earnings per share*16.216.7

The company sold 10,500 tractors in 1QFY02, this is at the same level as the corresponding quarter of the previous year. As the company has managed to maintain its volumes in a declining market, its market share in 1QFY02 went upto to 20.3% as compared to 17.9% in 1QFY01. In comparison, industry volumes at 52,000 tractors for 1QFY02 fell by 11.5% YoY over the last year's figure.

The company has shown a resilient performance in the past year, which has continued into the the first quarter of the current financial year. As the tractor industry has faced a tough period over the past two years, the company has managed to increase its market share through this period by launching new products and tapping the markets in South, East and West, where earlier it had a weaker presence. The company's new products in the 40 HP and above segment too have paid off, as this is a high margin segment.

As per the company's press release, Punjab Tractors has reported an improvement in its sales in 1QFY02, from Rs 2,142 m in 1QFY01 to Rs 2,205 m in 1QFY02, a growth of 2.9% YoY. The 1QFY01 figures have been regrouped in the current year. However, as these are not available to us currently, our above sales figures show a YoY decline. The figures in the table above for 1QFY01 are what the company had reported earlier.

We are bullish on the prospects for Punjab Tractors in the long term as monsoons have been normal till date. PTL is well geared to reap rewards when the recovery sets in. Its low valuations, negligible debt levels, increasing operating margins, profitable product mix and focused management holds the company in good stead.

On the current price of Rs 169, it is trading at 9.1x FY01 EPS of Rs 18.5.

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