Aptech: Bad run continues - Views on News from Equitymaster

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Aptech: Bad run continues

Jul 31, 2001

Aptech has beaten NIIT, by posting a 94% drop in profits (compared to 2QFY01) for 2QFY02. The YoY decline in revenues for the quarter is a significant 45%. However, on a sequential basis the company's revenues have grown by 14% and net profits have declined by 19%. In this quarter too (like 1QFY02), the company has managed to ensure profitability due to a significant other income component of Rs 35 m.

(Rs m) 2QFY01 2QFY02 Change
Sales 1,389 763 -45.1%
Other Income 2 35 1,651.0%
Expenditure 871 722 -17.1%
Operating Profit (EBDIT) 518 41 -92.1%
Operating Profit Margin (%) 37.3% 5.4%  
Interest 9 -   
Depreciation 84 54 -35.7%
Profit before Tax 427 22 -94.9%
Tax 55 - -100.0%
Profit after Tax/(Loss) 372 22 -94.1%
Net profit margin (%) 26.8% 2.9%  
Diluted number of shares 30.3 30.3
Diluted Earnings per share* 49.1 2.9 -94.1%
*(annualised)   16.6   

The education business contributed to 92% of the revenues for the quarter and the remaining 8% came from the company's software business. This translates to a YoY drop of 39% in the education business and a 75% drop in the software business.

The company's topline has taken a severe hit as realisations (earnings per student) in the software education sector have sharply fallen due to the decline in demand. The business has been hit due to the weakening in demand for software professionals in the US. The situation in the US has caused the revenues from the software business to also decline. However, compared to 1QFY02 the revenues from the education business have grown by 17%. This could be due to the seasonality in the education business. However, the software business has declined by 17% compared to the first quarter of FY02.

The decline in realisations has caused the operating margins for the company to come down steeply from 37.3% to 5.4% YoY.

At the current market price of Rs 48, the stock is trading at a P/E multiple of 17 times its 2QFY01 annualised earnings. Considering the present scenario it is quite unlikely that the realisations or the volumes in the education sector would pick up. Consequently, the prospects for the stock may be bleak in the near future.


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