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Pratibha Inds: Manufacturing saves the day - Views on News from Equitymaster

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Pratibha Inds: Manufacturing saves the day
Aug 3, 2011

Pratibha Industries has announced the first quarter financial results of financial year 2011-12 (1QFY12). The company has reported 10.0% YoY and 14.7% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 10.0% YoY during 1QFY12. Revenue growth was led by 17.4% YoY growth in the Manufacturing segment. However, revenues from Infrastructure & Construction (I&C) declined 7.4% YoY.
  • Operating profits increased 15.8% YoY during 1QFY12.
  • Net profits increased 14.7% YoY due to strong performance at the operating level.
  • Currently, the order book of the company is in the region of Rs 58 bn. During the month of July, the company bagged orders worth Rs 12.5 bn in consortium with a Chinese partner.


Consolidated financial snapshot
(Rs m) 1QFY11 1QFY12 Change
Sales 3,274 3,602 10.0%
Other operating income 10 12 13.1%
Expenditure 2,863 3,125 9.2%
Operating profit (EBDITA) 422 489 15.8%
Operating profit margin (%) 12.8% 13.5%  
Other income 1 1 20.8%
Interest 155 193 24.3%
Depreciation 40 43 7.2%
Profit before tax 227 254 11.6%
Tax 65 67 3.9%
Profit after tax/(loss) 162 186 14.7%
Net profit margin (%) 4.9% 5.2%  
No. of shares (m)   99.4  
Basic & diluted earnings per share (Rs)   7.82  
P/E ratio (x) *   6.9  
* On a trailing 12-months basis

What has driven performance in 1QFY12?
  • Net sales increased 10.0% YoY in 1QFY12 led by the Manufacturing segment. Revenues from I&C segment declined 7.4% YoY as majority of the projects were in the initial stage of progress. Accordingly, revenue recognition is expected to gain traction in the coming quarters as the execution gathers pace. Further, early onset of monsoons also impacted the revenue growth during the quarter.

    Segmental Break up
    (Rs m) 1QFY11 1QFY12 Change
    Infrastructure & Construction
    Revenue 4,002    3,706 -7.4%
    % share 94.9% 93.6%  
    PBIT margin 9.1% 11.7%  
    Manufacturing
    Revenue 214 251 17.4%
    % share 5.1% 6.3%  
    PBIT margin 12.6% 9.3%  
    Others
    Revenue   1 1 20.8%
    % share 0.0% 0.0%  
    PBIT margin 100.0% 100.0%  
    Total  4,217 3,959 -6.1%
    Less: Inter-segment revenue 931 344  
    Total
    Revenue  3,286 3,615 10.0%
    PBIT margin 11.9% 12.7%  

  • Operating profits increased 15.8% YoY in 1QFY12. Operating margins too registered an improvement of 70 bps due to fall in overall expenditure as a percentage of revenues. Operating expenses declined to 86.5% (as a percentage of revenues) in 1QFY12 from 87.2% in 1QFY11.

  • Bottom line registered 14.7% YoY growth on the back of strong performance at the operating level. However, increase in interest expenses dented profitability growth. Interest expenses increased 24.3% YoY due to stretched working capital cycle. (Debt is taken to meet working capital requirements)

What to expect?
At the current price of Rs 54, the stock trades at 4.6 times our estimated FY14 earnings. The company recently bagged orders to the tune of Rs 12.5 bn. It is also scouting for EPC contracts in Middle East and SAARC regions amidst diversification plans in overseas markets. Based on healthy order pipeline, management expects revenue growth to be in the region of 25% for FY12. Further, the company is also confident of maintaining its margins in the region of 15-16% despite raw material price inflation through selective bidding. Thus, considering the strong growth prospects and attractive valuations, we maintain our positive view on the stock.

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