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PTC India: Lower other income hurts profits - Views on News from Equitymaster
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PTC India: Lower other income hurts profits
Aug 4, 2010

PTC India has announced its 1QFY11 results. The company has reported a 16% YoY growth in sales. However, net profit has declined by 17% YoY. Here is our analysis of the results.

Performance summary
  • Sales grow by 16% YoY during 1QFY11, led by a 37% YoY jump in power trading volumes.
  • Operating margins rise to 1% during the quarter, from 0.6% in 1QFY10. Lower power purchase costs (as percentage of sales) lead to this improvement.
  • Despite a sharp 85% YoY growth in operating profit, net profit declines by 17% YoY during the quarter. Lower other income and significantly higher tax leads to this weak performance on the profit front.

Financial performance: A snapshot
(Rs m) 1QFY10 1QFY11 Change
Units traded (m) 4,204 5,747 36.7%
Sales 23,725 27,584 16.3%
Expenditure 23,575 27,307 15.8%
Operating profit (EBDITA) 150 278 84.8%
Operating profit margin (%) 0.6% 1.0%  
Other income 276 138 -50.1%
Depreciation 14 12 -11.3%
Interest 1 1 -4.5%
Profit before tax 413 403 -2.3%
Extraordinary income/(expense) (0) (0)  
Tax 79 125 58.7%
Profit after tax/(loss) 334 278 -16.7%
Net profit margin (%) 1.4% 1.0%  
No. of shares 294.1 294.6  
Diluted earnings per share (Rs)*   3.0  
P/E ratio (x)*   37.3  
* On a trailing 12-months basis

What has driven performance in 1QFY11?
  • PTC saw its net sales grow by 16% YoY during 1QFY11. This was aided by a strong 37% YoY growth in trading volumes. The company traded around 5.7 bn units (BU) of power during the quarter as against 4.2 BU in 1QFY10. However, given that it had sourced power during the quarter at an average rate of Rs 4.7 per unit (down 15% YoY), and it had to pass on the same to the buyers, realisations were impacted. This was the biggest reason for the lower growth in value sales as compared to the growth in volume sales. The company’s average selling price for its traded power stood at Rs 4.8 per unit, which was again lower by around 15% YoY.

  • PTC’s operating margins improved to 1% in 1QFY11, from 0.6% in 1QFY10. Improvement in trading margins from 5.4 paisa per unit to 5.8 paisa in 1QFY11 led to this expansion in operating margins.

  • Despite a robust 85% YoY growth in operating profits, PTC’s net profit declined by 17% YoY during the quarter. This was largely due to lower other income (down 50% YoY) and higher taxes. The company’s effective tax rate increased from 19% in 1QFY10 to 31% in 1QFY11.

What to expect?
At the current price of Rs 112, the stock is trading at a multiple of 24.7 times our estimated FY13 earnings. This makes it expensively valued. We thus maintain a cautious view on the stock (ResearchPro subscribers, please click here>).

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Feb 23, 2018 (Close)


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