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Pratibha Industries: Growth overshadows margins - Views on News from Equitymaster

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Pratibha Industries: Growth overshadows margins

Aug 5, 2008

Performance summary
  • 1QFY09 sales grow by 162% YoY.
  • EBIDTA margins drop by 1.7% YoY, largely on account of stock related adjustments.
  • Net profits grow by 94% YoY during 1QFY09. Net profit margins down by 2% YoY, mainly due to an unstable operating performance along with higher interest costs.

(Rs m) 1QFY08 1QFY09 Change
Sales 745 1,952 161.9%
Expenditure 652 1,742 167.0%
Operating profit (EBDITA) 93 210 125.9%
Operating profit margin (%) 12.4% 10.7%
Other income 0 13 12167.9%
Interest 13 78 495.1%
Depreciation 4 13 233.1%
Profit before tax 76 132 74.2%
Tax 16 16 0.5%
Profit after tax/(loss) 60 116 93.8%
Net profit margin (%) 8.0% 6.0%
No. of shares (m) 16.7
Earnings per share (Rs) 23.9
P/E ratio (x) 9.7
Note: As the company amalgamated its SAW pipe manufacturing division in the previous year,
results are not comparable on a YoY basis.

What has driven performance in 1QFY09?
  • Pratibha Industries (PIL) recorded a strong 170% YoY topline growth during 1QFY09. During the quarter, the companyís infrastructure segment contributed nearly 88% of total revenues, while the manufacturing (SAW pipes) division added the balance. As data for the corresponding quarter in the previous year is not available, we have compared the 1QFY09 margins and segmental revenues with the companyís FY08 results. The manufacturing unit witnessed a slower growth during 1QFY09 (see table below), as its share in total revenues reduced to 11.6% in 1QFY09 from 17.4% in FY08. Further, in 1QFY09, the PBIT margins for both, the infrastructure & construction and manufacturing segments dropped by 2.8% and 2.6% respectively, as compared to PBIT margins in FY08.

    (Rs m) FY08 1QFY09
    Infrastructure & construction
    Revenue 4,713 1,919
    % share 82.6% 87.8%
    PBIT margin 11.4% 8.5%
    Revenue 992 253
    % share 17.4% 11.6%
    PBIT margin 9.1% 6.5%
    Unallocated 0 13
    Revenue 5,706 2,185
    PBIT Margin 11.0% 8.6%
    * Excluding inter-segment adjustments; includes other income

  • As compared to its revenue growth, PILís expenditures grew at a faster rate of 167% YoY during 1QFY09, leading to its operating margins to contract by 1.7% YoY. The change in expenditure was primarily due to stock related adjustments. However, PIL recorded a strong 126% YoY growth in operating profits during the quarter.

  • PILís net profit margins dropped by 2.1% YoY on account of an unstable operating performance coupled with higher interest and depreciation costs. Nevertheless, PIL managed to record a 94% YoY growth in net profits, aided by a strong growth in its topline.

What to expect?
At the current price of Rs 232 the stock is trading at a multiple of 5.4 times our estimated FY10 earnings. As on March 2008, the company had an order backlog of Rs 20.5 bn (3.6 times its FY08 earnings), portraying good revenue visibility going forward. We have a positive view on the stock from a two-year perspective. We will update our research report soon.

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Mar 18, 2019 (Close)


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