X

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.
Indian Rayon: Garment pick up - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

Indian Rayon: Garment pick up

Oct 22, 2003

Indian Rayon has reported a topline growth of 14% YoY for the September quarter, aided mainly by impressive growth in garments, textile and VFY (viscose filament yarn) segments. Also, for the same period, the company has reported a substantial 73% YoY growth in its bottomline, which has been helped by extra ordinary income and a steep fall in interest cost. However, the topline growth for 1HFY04 is not very impressive, affected by the dismal performance of it VFY and textile divisions in 1QFY04.

(Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
Sales 3,733 4,263 14.2% 7,378 7,653 3.7%
Other Income 66 59 -10.6% 76 88 15.8%
Expenditure 3,128 3,572 14.2% 6,084 6,420 5.5%
Operating Profit (EBDIT) 605 691 14.2% 1,338 1,288 -3.7%
Operating Profit Margin (%) 16.2% 16.2%   18.1% 16.8%  
Interest (net) 89 45 -49.2% 219 89 -59.4%
Depreciation 188 225 19.5% 373 410 9.9%
Profit before Tax 394 480 21.9% 822 877 6.7%
Extraordinary item - 200   - 200  
Tax 84 144.1 71.5% 187 233 24.6%
Profit after Tax/(Loss) 310 536 72.7% 635 844 32.8%
Net profit margin (%) 8.3% 12.6%   8.6% 11.0%  
Number of shares 59.9 59.9   59.9 59.9  
Diluted Earnings per share* 20.7 35.8   21.2 28.2  
P/E (x)   5.5     6.9  
(*annualised)            

The major cost, which is on account of raw materials have remained constant at around 50%, as percentage of net sales, and this has helped operating margins for 2QFY04 to remain stable at 16.2%. Interest expenses of the company reduced by around 38% as the company has repaid debentures worth Rs 770 m in last nine months. Combined with this decline in interest expenses , a 17% increase in interest income has resulted the net interest paid to decline by 49% during 2QFY04. Also, extraordinary earning of around Rs 200 m arising out of the company’s disposal of its holding in Indo Gulf Fertilizers, have helped in improving the net profit margins by around 430 basis points.

Indian Rayon is a diversified company and, as such, a segmental break-up would help in a better understanding of the company’s financial performance. Take a look at the table below.

Revenue mix
(Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
Garments 900 1125 25.0% 1,680 2,017 20.1%
VFY 866 952 9.9% 1,676 1,649 -1.6%
Carbon black 813 881 8.4% 1,573 1,628 3.5%
Insulator 162 166 2.5% 608 301 -50.5%
Textiles 856 1000 16.8% 1,658 1,867 12.6%
Others 135 129 -4.4% 184 192 4.3%
Total 3,732 4,253 14.0% 7,379 7,654 3.7%

As seen from the above table, revenues from the garment segment have grown by 25% on the back of higher volumes (up 34%). In its strategy to counter competition from lower end cheap suppliers, Indian Rayon has been successful in introducing lower price point products (through its Peter England brand), which has helped it in improving its volumes. For this (garment) segment, the PBDIT margins have remained stable at little higher than 8%.

VFY revenues for the quarter were up by around 10%. For 2QFY04, volumes increased by around 10% YoY for this segment, but the realisations remained at same levels as compared to 2QFY03. PBDIT margins for the segment also remained stable at around 26%. The outlook for VFY business is positive, as VFY is gaining increasing acceptance in the fashion industry. The company has stated that it will focus on premium segment and will try to increase the sale of first quality yarn to 76% (from 62% at present) of total VFY business. Its also plans to set up dyed yarn units going forward, which will further strengthen the product portfolio of the company.

Textile revenues for the quarter increased by around 16% YoY. However, the margins lowered mainly due to increase in prices of wool, which forms the major chunk of raw material for worsted yarn, which contributed around 43% of the textile segment revenues. Since 50% of the textile revenues comes from exports, strengthening of rupee also affected the realisations.

Coming to the carbon black business, for the September quarter, its revenues went up by around 8% YoY mainly due to higher volumes. However, realisations came down marginally. The outlook for the segment remains positive due to growth prospects in auto sector. The company is expanding its carbon black production by around 36%, which is expected to come up by the end of last quarter of FY04.

At the current price of Rs 195, the stock trades at a P/E multiple of 6.9x its annualised 1HFY04 earnings. However, excluding extra ordinary income, which is not recurring in nature, the stock trades at P/E multiple of 18.1x. Indian Rayon’s divestment into unrelated businesses is still a cause of concern. The company had already burnt its fingers in acquiring stake in MRPL, which it later sold off to ONGC, registering a one-time loss. Even recently, the company has completed acquisition of Trans Works, a BPO business. Investors need to remain cautious considering the company’s diversified (into unrelated areas) business interest.


Equitymaster requests your view! Post a comment on "Indian Rayon: Garment pick up". Click here!

  

More Views on News

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

Most Popular

Stocks that Could Be Out of Reach Post Elections(The 5 Minute Wrapup)

Apr 9, 2019

It's a matter of time before the stocks catch the fancy of the markets and big investors.

3 Indian Stocks with Amazon-Like Potential(Profit Hunter)

Apr 10, 2019

We have identified 3 stocks with huge wealth building potential which meet our 'Click of a Button' criteria.

This Company is Making a Big Comeback and You Can Now Profit from Its Example(The 5 Minute Wrapup)

Apr 10, 2019

How Dell got its mojo back.

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

More

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

ADITYA BIRLA NUVO SHARE PRICE


Jul 4, 2017 (Close)

TRACK ADITYA BIRLA NUVO

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

MORE ON ADITYA BIRLA NUVO

ADITYA BIRLA NUVO - BALMER LAWRIE COMPARISON

COMPARE ADITYA BIRLA NUVO WITH

MARKET STATS