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Pratibha Ind.: Forex fluctuation wipes out profits - Views on News from Equitymaster

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Pratibha Ind.: Forex fluctuation wipes out profits
Sep 4, 2013

Pratibha Industries announced its results for the quarter ended June 2013. During 1QFY14, net sales came in flat, while profits fell by 99% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated revenues remain flat during the quarter ended June 2013.
  • On the back of a 0.7% YoY contraction in margins, the company's operating profits fall by 6% YoY.
  • Entire profits are wiped out on the back of higher depreciation and interest charges coupled with higher tax rate.
  • At the end of the quarter, the order book stood at about Rs 74 bn, which stands at about 4.8 times its trailing twelve month revenues.


Standalone financial snapshot
(Rs m) 1QFY13 1QFY14 Change
Income from operations 5,616 5,563 -0.9%
Expenditure 4,797 4,793 -0.1%
Operating profit (EBDITA) 819 770 -6.0%
Operating profit margin (%) 14.6% 13.8%  
Other income 21 33 58.4%
Finance costs 451 665 47.6%
Depreciation 65 96 47.0%
Profit before tax 324 42 -87.0%
Tax 96 40 -57.9%
Profit after tax/(loss) 228 2 -99.3%
Net profit margin (%) 4.1% 0.0%  
No. of shares (m)   101.1  
Basic & diluted earnings per share (Rs)   5.9  
P/E ratio (x) *   3.1  
* On a trailing 12-months basis

What has driven performance in 1QFY14?
  • Pratibha Industries' (PIL) revenues came in flat, lower by about 1% YoY during the quarter ended June 2013.

  • At the operating level, the company's margins contracted by 0.7% YoY largely due to higher other expenses. Operating profits declined by 6% YoY.

  • Further, while the company reported a higher other income of 58%YoY, it was offset by a sharp increase in depreciation and finance costs. It may be noted that the finance costs include Rs 147 m loss on forex fluctuation. All these factors led to a sharp decline in profits for the quarter. The profits were almost wiped out by higher tax charge. Consolidated profits came in at Rs 2 m for the quarter, which is lower by over 99% YoY
What to expect?
At the current price of Rs 18.5, the stock trades at a multiple of 3.1 times its trailing 12-month EPS. We gave a sell on the earlier update due to concerns over the company's rising debt levels and lowering interest coverage ratios. We maintain our negative view on the stock.

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