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Tata Chem: Profits rise 8% in 1HFY03 - Views on News from Equitymaster
 
 
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  • Oct 24, 2002

    Tata Chem: Profits rise 8% in 1HFY03

    Tata Chemicals has registered a 13% growth in sales for 2QFY03. Operating profits have grown at a faster clip (19%) due to improvement in operating efficiencies. Soda ash prices have remained stable in the last one year and hence most of the operating margin jump seems to have come from cost savings.

    (Rs m) 2QFY02 2QFY03 % change 1HFY02 1HFY03 % change
    Sales 3,881 4,391 13.1% 6,795 8,013 17.9%
    Other Income 166 99 -40.1% 203 176 -13.4%
    Expenditure 2,829 3,138 10.9% 4,933 5,674 15.0%
    Operating Profit (EBDIT) 1,052 1,253 19.1% 1,862 2,339 25.6%
    Operating Profit Margin (%) 27.1% 28.5% 27.4% 29.2%
    Interest (net) 309 248 -19.7% 623 507 -18.5%
    Depreciation 330 339 2.8% 659 679 3.0%
    Profit before Tax 579 765 32.1% 784 1,329 69.6%
    Extraordinary Income (36) (35) - (72) (70) -
    Tax 109 259 138.3% 146 449 207.5%
    Profit after Tax/(Loss) 434 470 8.3% 566 810 43.2%
    Net profit margin (%) 11.2% 10.7% 8.3% 10.1%  
    No. of Shares (m) 180.7 180.7   180.7 180.7  
    Diluted Earnings per share* 9.6 10.4   12.5 17.9  
    P/E (x)     2.8  
    (*annualised)            

    In the salt business, the company also aimed at increasing contribution from exports as rates are lucrative (international salt prices are at US$ 1/kg as compared to US$ 0.2/kg in the domestic market). Besides, Tata Chem is also focusing on boosting revenues from its salt division by branding its products aggressively. This also could have aided topline growth in second quarter and 1HFY03.

    Tata Chemicals has consistently improved its operating margins in the last few quarters on the back of restructuring and cost cutting exercise. This is line with its objective of becoming the lowest cost producer of synthetic soda ash globally. The improvement in margins in 2QFY03 and 1HFY03 is due to the same reason. Since the company generates strong cash flow from operations, interest costs have declined significantly thus aiding bottomline growth. Despite a sharp spurt in tax outgo, the company's performance in 1HFY03 is commendable. The stock currently trades at Rs 50 implying a P/E multiple of 2.8x annualised 1HFY03 earnings.

     

     

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