Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IPCL: Good show - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

IPCL: Good show

Oct 13, 2003

Reliance controlled IPCL, one of the major players in the petrochemicals segment, declared its 2QFY04 results today. The company registered a 20% bottomline growth on the back of a 7% increase in topline. The results, however, are relatively subdued as compared to the last few quarters wherein IPCL managed to post impressive topline and bottomline growth.

(Rs m)2QFY032QFY04Change1HFY031HFY04Change
Net sales 12,520 13,450 7.4% 21,080 27,000 28.1%
Other Income 190 210 10.5% 280 420 50.0%
Expenditure 10,000 10,430 4.3% 16,540 21,740 31.4%
Operating Profit (EBDIT) 2,520 3,020 19.8% 4,540 5,260 15.9%
Operating Profit Margin (%)20.1%22.5% 21.5%19.5% 
Interest 750 860 14.7% 1,800 1,670 -7.2%
Depreciation 1,120 1,240 10.7% 2,240 2,370 5.8%
Profit before Tax8401,13034.5%7801,640110.3%
Extraordinary expenses - 90   - 1,310  
Tax 390 500 28.2% 390 (600) 
Profit after Tax/(Loss) 450 540 20.0% 390 930 138.5%
Net profit margin (%)3.6%4.0% 1.9%3.4% 
No. of Shares 249.0 249.0   249.0 249.0  
Diluted Earnings per share*7.28.7 3.17.5 
P/E Ratio     24.6  

Let us first consider the 2QFY04 results in brief. The topline increase seems largely a factor of sales volume growth. However, it was the control over expenditure, which helped the company improve its operating margins by 240 basis points. While the raw material contribution as a percentage of sales increased, the management was able to control the staff costs and other administrative expenses. The reduction in staff costs was also due to the fact that over the last two quarters, around 1,600 employees of the company have opted for VRS. The effect of this is visible in the form of extraordinary expenses of Rs 1.3 bn, a part of which (Rs 90 m) has been put to effect in the September quarter. Without the VRS effect, the PAT growth for 2QFY04 would have been at 40%.

Now, as far as the performance of the company for the first half of the current fiscal is concerned, it has been splendid. It can be seen in the table above, the company’s bottomline surged 139% on the back of a 28% growth in topline. During this period, the company’s export of manufactured goods was higher by 44%. The other income component also increased by a hefty 50% on account of higher export benefits.

However, the operating margins of the company have taken a hit in 1HFY04 on account of unfavorable petrochemical product prices during the June 2003 quarter. It should be noted that overall realisations had declined by about 9% in 1QFY04. Increase in raw material prices also pressurised operating margins. However, for the first half of the current fiscal, the interest outgo of the company reduced by 7% signifying that the company’s efforts at reducing debt have been yielding results.

The company has informed that consequent to a change in the method of providing depreciation in respect of certain assets at the Vadodara Complex, the additional depreciation charge of Rs 2.1 bn has been written off against the general reserve. Further, the company has also stated that as per the new accounting standard (AS-26) regarding valuation of intangible assets, an amount of Rs 220 m, being the balance of unamortised miscellaneous expenditure, has been also written off against the general reserve. The effect of these adjustments would lead to a reduction in the book value of the stock.

At Rs 184, the stock is trading at P/E multiple of almost 25x its 1HFY04 annualised earnings. While the valuations are on the higher side of the petrochem spectrum, the outlook given by the management points to the current upturn in the petrochemical cycle sustaining, which would be beneficial for the company. Improved polymer prices and synergies with Reliance are likely to benefit IPCL in terms of cost rationalisation.

Equitymaster requests your view! Post a comment on "IPCL: Good show". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

These 3 Smallcap Stocks are Set to Make the Most of Smallcap Rebound (Profit Hunter)

Jul 9, 2019

As the sense of normalcy returns to the markets, the rebound in the quality smallcaps could be huge.

2 Stocks from Super Investor Sanjay Bakshi's Portfolio You Can Bet On... (The 5 Minute Wrapup)

Jul 12, 2019

Despite the current fear prevailing in the markets, both these stocks have the potential to deliver in 4-5 years.

After Disappointing Budget, Here's a Document that Concerns Largecap and Smallcap Investors (The 5 Minute Wrapup)

Jul 8, 2019

A new 'definition' of the stock universe that triggered the smallcap sell-off is back with the latest list...

Here's What to Do with Falling Small Cap Stocks (Profit Hunter)

Jul 10, 2019

There are some great buying opportunities in the market right now - and the small cap space is your best bet.

Budget an Icing on the Cake for This Smart Money Backed Affordable Housing Stock (The 5 Minute Wrapup)

Jul 10, 2019

Affordable housing is one of the most straightforward growth stories in India. This will help the real estate sector to come out of the slump.


Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms