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Punjab Tractors 1QFY01: net down 29.4% - Views on News from Equitymaster
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  • Aug 2, 2000

    Punjab Tractors 1QFY01: net down 29.4%

    Punjab Tractors, a leading tractor manufacturer has reported a net profit of Rs 247m for the 1QFY01, a decline of 29.4% YoY. The company's sales fell by 21.5% YoY in the 1QFY01 to Rs 2,490 m, due to a slowdown in tractor sales for the quarter.

    Due to strict cost control measures, the company's operating margins fell from 16.0% in the 1QFY00 to 15.6% in the 1QFY01. This would have been higher if the company had not resorted to the above measures. However due to higher depreciation costs the company's net margins declined by over 100 basis points to 9.9% in the 1QFY01.

    (Rs m) 1QFY00 1QFY01 Change
    Sales 3,171 2,490 -21.5%
    Other Income 13 8 -41.5%
    Expenditure 2,664 2,101 -21.2%
    Operating Profit (EBDIT) 507 389 -23.2%
    Operating Profit Margin (%) 16.0% 15.6%  
    Interest - - -
    Depreciation 35 44 25.7%
    Profit before Tax 485 353 -27.2%
    Other Adjustments - - -
    Tax 135 106 -21.5%
    Profit after Tax/(Loss) 350 247 -29.4%
    Net profit margin (%) 11.0% 9.9%  
    No. of Shares (eoy) (m) 20.3 60.9  
    Diluted number of shares 60.9 60.9  
    Diluted Earnings per share* 23.0 16.2  

    For the 1QFY01, the tractor industry has reported a drop in volumes by 17.7% YoY due to drought conditions in some states over this period. This has resulted in a decline in volumes for most leading tractor manufacturers.

    However as the monsoons are expected to be normal in the current year, this should lead to higher demand for tractors in the months to follow. Punjab Tractors, has a very good brand name in all the major markets where it operates. Its market share had increased from 18.5% in FY99 to 19.7% in FY2000.

    Given the low tractor density per 1,000 hectares in India and the fact that agriculture continues to be a priority area, the tractor industry's future looks bright. Keeping in mind the long term prospects for the industry and the company's conservative financing policies, Punjab Tractors is an attractive play on the Indian tractor industry.

    On the current price of Rs 230, Punjab Tractors is trading at 10.5x FY2000, on its fully diluted EPS of Rs 21.9.



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