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MICO: Profits plummet

Oct 29, 2001

The slowdown in the economy and sluggish auto volumes have had a significant impact on the third quarter results of Motor Industries Company (MICO). While sales have dropped by 11% for 3QFY02, profits have plummeted by 41% on account of a sharp fall in operating margins.

(Rs m) 3QFY01 3QFY02 Change 9mFY01 9mFY02 Change
Sales 4,163 3,704 -11.0% 12,225 11,704 -4.3%
Other Income 64 77 21.1% 260 242 -7.1%
Expenditure 3,470 3,277 -5.6% 10,258 10,167 -0.9%
Operating Profit (EBDIT) 694 428 -38.3% 1,967 1,536 -21.9%
Operating Profit Margin (%) 16.7% 11.5%   16.1% 13.1%  
Interest 45 (26)   59 (18)  
Depreciation 341 332 -2.7% 1,149 981 -14.6%
Profit before Tax 371 199 -46.4% 1,020 815 -20.1%
Extraordinary item (6) 5   285 82  
Tax 120 60 -50.3% 473 277 -41.4%
Profit after Tax/(Loss) 245 144 -41.1% 832 620 -25.5%
Net profit margin (%) 5.9% 3.9%   6.8% 5.3%  
No. of Shares (eoy) (m) 3.6 3.4   3.6 3.6  
Diluted number of shares 3.4 3.4   3.4 3.4  
Earnings per share (Rs)* 287.9 169.6   325.8 242.8  
(*annualised)            

Operating margins in 3QFY02 has come down to 11.5% in 3QFY02 from 16.7% in the corresponding quarter of the previous year. While raw material and staff costs have fallen by 19.9% and 1.1% respectively during the aforesaid quarter, higher other expenses (up 16.7%) suppressed margins. The voluntary retirement programme initiated by the company has resulted in cutting workforce by 500 employees.

The company is dependant on the commercial vehicles market mainly due to its strong presence in the diesel fuel injection pumps market. Given the fact that the CV volumes have remained sluggish for the first half of the current financial year, volume growth has come under pressure. However, MICO had set up a plant in Jaipur to manufacture petrol fuel injection pumps sets last year to cater to the growing passenger car market. Though this has strengthened its position in the fuel injection as well as the OEM segment, the continued weakness in auto volumes remains a cause for concern. The slow down in the OEM segment also has affected performance of the company in the after-market segment for the manufactured goods.

The scrip is currently trading at Rs 1,695 on a P/E multiple of 6.9x the annualised nine months earnings.


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