X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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.
VST Industries: Raw material impact margins - Views on News from Equitymaster
MidCapSelect
  • MyStocks

MEMBER'S LOGINX

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

VST Industries: Raw material impact margins
Oct 16, 2009

Performance summary
  • Sales for the quarter grew by a robust 30% YoY while sale for 1HFY10 grew by a spectacular 52% YoY on the back of price increases.
  • Operating income (EBITDA) grew by 63% for 2QFY10 while for 1HFY10 it grew by 144% YoY on the back of lower costs.
  • For the quarter net profit increased by 52% YoY while for 1HFY10, it grew by 88% YoY. Net profit was capped in spite of strong sales growth due to higher tax expense.


(Rs. m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales 893 1,164 30.4% 1,599 2,426 51.7%
Expenditure 749 929 24.0% 1,386 1,906 37.6%
Operating profit (EBDITA) 144 236 63.2% 213 519 143.6%
EBDITA margin (%) 16.2% 20.2%   13.3% 21.4%  
Other income 38 43 13.1% 139 137 -1.2%
Interest (net) 0 -3   0.2 -6  
Depreciation 35 41 14.7% 76 79 4.6%
Profit before tax 147 241 64.0% 276 583 111.3%
Extraordinary inc/(exp) 0 0   0 0  
Tax 35 70 101.4% 57 171 199.6%
Profit after tax/(loss) 113 172 52.4% 219 413 88.3%
Net profit margin (%) 12.6% 14.7%   13.7% 17.0%  
No. of shares (m) 15.4 15.4   15.4 15.4  
Diluted earnings per share (Rs)*         52.6  
Price to earnings ratio (x)         9.6  
* trailing 12 month earning

What has driven performance in 2QFY10?
  • Sales for the quarter grew by 30% YoY on the back of price increase while for 1HFY10 it grew by 52% YoY.

    Cost break-up…
    (Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
    Raw materials 423 629 48.7% 732 1,331 81.7%
    % sales 47.4% 54.1%   45.8% 54.9%  
    Staff cost 104 124 19.0% 224 252 12.9%
    % sales 11.6% 10.6%   14.0% 10.4%  
    Other expenditure 221 176 -20.7% 326 354 8.4%
    % sales 24.8% 15.1%   20.4% 14.6%  

  • Operating margins increased by 4% YoY to 20.2% during the quarter due to lower increase in employee costs compared to sales offset by higher raw material costs. However, when adjusted for foreign exchange loss in 2QFY09, operating margins were lower by 3.3% YoY. For 1HFY10, operating margins stood at 21.4%, an increase of 7% YoY on the back of lower growth in employee costs while being negatively impacted by higher raw material costs. However, when adjusted for foreign exchange loss in 1HFY09 and gain in 1HFY10, operating margins grew by only 0.4% YoY to 20.2%.

  • Net profit margins for 2QFY10 increased by 2.1% YoY to 14.7% and net profits witnessed a growth of 52% YoY. This is on the back of higher sales growth and higher profit margins offset by increase in tax expenses. However, when adjusted for foreign exchange loss in 2QFY09, the net profit margins are seen to fall by 5.2% YoY and net profits by 4% YoY, indicating that the growth may not be sustainable after all.

  • For 1HFY10, net profit margins increased by 3.3% YoY to 17% on the back of higher sales growth and higher profit margins while it was negatively impacted by higher tax expenses. However, when adjusted for foreign exchange loss in 1HFY09 and gain in 1HFY10 net margins fall by 4.4% YoY to 15.8% and net profits show a relatively smaller growth of 18% YoY as opposed to the current growth of 88% YoY.

What to expect?
At a price of Rs 505, the stock is trading 11 times our estimated FY11 earnings. While the stock has run up a lot since our last recommendation, we would advise existing investors to continue holding the company as not only has it shown a growth of 18% in profits in the first half, it is not excessively priced either from a medium term perspective. Furthermore, it also trades at a decent dividend yield of 6%. However, we would advice against any further investment at current levels.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

VST INDUSTRIES SHARE PRICE


Feb 23, 2018 (Close)

TRACK VST INDUSTRIES

  • Track your investment in VST INDUSTRIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON VST INDUSTRIES

VST INDUSTRIES 8-QTR ANALYSIS

COMPARE VST INDUSTRIES WITH

MARKET STATS