X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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.
VisualSoft: Dip, Dip, Dip - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 22, 2001

    VisualSoft: Dip, Dip, Dip

    VisualSoft continues to be in trouble. For 2QFY02, the company has posted very disappointing numbers once again. The topline has fallen by 18% sequentially and the dip in net profits is 46%. On a YoY basis, revenues have declined by 22% and the bottomline has come down by 69%.

    Te reason for concern is that the product sales continue to decline sharply and this shows no signs of letting up. In 1QFY02, the company had posted a sequential dip of 59% in product related revenues and in 2QFY02 the figure is 80%. While in the earlier quarters only the company's product sales were in trouble, this quarter its services revenues too have shown a sequential de-growth of 3%.

    (Rs m) 1QFY02 2QFY02 Change
    Sales 285 234 -17.9%
    Other Income 10 16 62.3%
    Expenditure 188 182 -3.2%
    Operating Profit (EBDIT) 97 51 -46.7%
    Operating Profit Margin (%) 33.9% 22.0%  
    Interest - -  
    Depreciation 13 19 40.9%
    Profit before Tax 93 49 -47.5%
    Tax 2 2 25.4%
    Profit after Tax/(Loss) 92 47 -48.9%
    Net profit margin (%) 32.1% 20.0%  
    Diluted number of shares (m) 19.7 19.7  
    Diluted Earnings per share* 18.6 9.5  
    P/E (at current price)   8.6  
    *(annualised)      

    With the declining contribution of product related revenues to sales (which now stands at 5% of revenues) the company’s operating margins have declined sharply. The contribution of product sales to revenues has declined from 48.2% in 2QFY01; this translates to a 92% dip in product related sales YoY.

    (Rs m) 1QFY02 2QFY02 Change
    Services 230 223 -3.2%
    % Contribution to revenues 80.8% 95.3%  
    Products 55 11 -79.9%
    % Contribution to revenues 19.2% 4.7%  
    OPM 33.9% 22.0%  

    VisualSoft has managed to keep a tab on its costs. Both the staff and miscellaneous costs have shown a decline compared to the first quarter of FY02. However, this dip has not been in line with the sharp fall in topline causing the operating margins to head south. The contribution of offshore revenues has increased from 59% in 1QFY02 to 65% of its services revenues in the current quarter. However, the revenues from product related services have shown a steep drop of 47% sequentially and this has caused the contribution to services revenues to come down from 11% to 6%. VisualSoft added 5 new clients during the quarter.

    With a share of 63% of the revenues, the US was the largest market for the company. Europe’s contribution was 28% and others contributed 8%. However, VisualSoft is looking at diversifying its markets. The company has signed up distribution contracts with two Japanese companies namely ‘International Systems Research Company’ and ‘New Tone’, for the company’s product namely VisualeSales and VisualSoft NetDev. These companies will translate the products in Japanese language and market them in the region. The company also tied up with a US based company called ‘IT Global Secure’ for distributing its security products. In all, the total number of channel and distribution partners as at 30th Sep 2001 stands at 30 in number.

    At the current market price of Rs 82, the stock is trading at a P/E multiple of Rs 9 times its 2QFY02 annualised earnings. The September quarter was in fact quite positive for the software sector going by the numbers that companies have posted. However, VisualSoft failed to show any improvement in its performance during this quarter. The third and the fourth quarters are expected to be even tougher in the wake of tragic events in the US. Thus, VisualSoft’s performance in the next two quarters could be even more dismal. Thus, the valuations that have run up post results could be temporary and the stock might return to price levels seen before the results and remain range bound.

     

     

    Equitymaster requests your view! Post a comment on "VisualSoft: Dip, Dip, Dip". Click here!

      
     

    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    HCL Tech: Ends FY17 on Expected Lines (Quarterly Results Update - Detailed)

    Jun 29, 2017

    Volvo partnership caps a good year for HCL Technologies.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK VISUALSOFT(I)

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

    MARKET STATS