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.
Emco: Yet another quarter of red ink - Views on News from Equitymaster

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

MidCapSelect
  • MyStocks

MEMBER'S LOGINX

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

Emco: Yet another quarter of red ink
Oct 25, 2010

Emco has announced its 2QFY11 results. The company has reported a 44% YoY growth in sales, and a quarterly loss on the bottomline front. Here is our analysis of the results.

Performance summary
  • Standalone topline grows 44% YoY during 2QFY11.
  • Operating margins contract fall into the negative, impacted by a significant rise in raw material costs (as percentage of sales).
  • Reports a net loss at the bottomline level due to a negative performance at the operating level as well as a rise in depreciation and interest expenses.

Financial performance snapshot
(Rs m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
Sales 2,014 2,902 44.1% 3,941 4,089 3.8%
Expenditure 1,754 3,176 81.1% 3,428 4,618 34.7%
Operating profit (EBDITA) 260 (274) -205.3% 512 (529) -203.2%
Operating profit margin (%) 12.9% -9.4%   13.0% -12.9%  
Other income 3 0   4 0  
Interest        78    112 44.0% 165 203 23.3%
Depreciation        44      46 2.9%       88 92 4.7%
Profit before tax      141 (431)      264 (823) -412.2%
Extraordinary income/(expense) 985       -        985       -    
Tax        48 (145)         89 (278) -412.8%
Profit after tax/(loss) 1,079 (286)   1,160 (545) -147.0%
Net profit margin (%) 53.6% -9.9%   29.4% -13.3%  
No. of shares       58.8 61.9  
Diluted earnings per share (Rs)*         (5.9)  
P/E ratio (x)*         NA  
* On a trailing 12 months basis    # Excluding extraordinary items

What has driven performance in 2QFY11?
  • Emco's standalone topline grew 44% YoY during the quarter. A part of the reason for this is that a large number of sub-station orders got commissioned during the quarter enabling the company to book revenues on account of the same.

  • Emco's operating margins fell into negative territory 2QFY11. This was mainly on account of raw material costs (as a percentage of sales) seeing a very sharp spike during the quarter. Many of the substation projects that got commissioned during the quarter saw cost overruns due to delays and quantity variations, coupled with them being fixed price contracts where the company did not have the option passing on increased costs to the customer. Also, the company has made provisions during the quarter for similar losses on projects that are still under execution as per quarter end management estimates.

  • Emco also saw substantially higher interest expenses during the quarter. This along with the negative operating margins led to the company reporting an after tax loss of Rs 286 m.

What to expect?
At the current price of Rs 63, the stock is trading at a multiple of 7.3 times our estimated FY13 earnings per share. As indicated by the management, the transformer business continues to see price pressures on account of severe competition and excess capacity. Execution of transmission line projects has also been adversely impacted due to excess rains this monsoon as also right of way issues. At the current price, we continue to maintain a cautious view on the stock (Research Pro subscribers, kindly click here.)

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

EMCO LTD SHARE PRICE


Jul 20, 2018 (Close)

TRACK EMCO LTD

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

EMCO LTD - BHARAT ELECTRONICS COMPARISON

COMPARE EMCO LTD WITH

MARKET STATS