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PTC: Weaker realisations hurt sales - Views on News from Equitymaster
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PTC: Weaker realisations hurt sales
Oct 29, 2010

PTC has declared its 2QFY11 results. The company has reported a marginal 0.5% YoY growth in sales while net profit has risen by 29% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow marginally by 0.5% YoY during 2QFY11, 8% YoY during 1HFY11.
  • Operating margins improve to 1.5% in 2QFY11, helped by lower employee costs (as percentage of sales).
  • Helped by better operating margins and lower taxes, net profit rises by 29% YoY during the quarter.


Financial performance: A snapshot
(Rs m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
Units traded (m) 6,388 7,730 21.0% 10,592 13,477 27.2%
Sales 24,582 24,693 0.5% 48,299 52,269 8.2%
Expenditure 24,285 24,312 0.1% 47,854 51,619 7.9%
Operating profit (EBDITA) 297 381 28.3% 444 650 46.4%
Operating profit margin (%) 1.2% 1.5%   0.9% 1.2%  
Other income 175 180 2.5% 455 327 -28.2%
Depreciation 14 12 -11.0% 27 24 -11.1%
Interest 0 2   1 3  
Profit before tax 458 546 19.2% 871 950 9.0%
Extraordinary income/(expense) (0) -   (0) (0)  
Tax 149 147 -1.7% 228 272 19.2%
Profit after tax/(loss) 309 399 29.2% 643 678 5.4%
Net profit margin (%) 1.3% 1.6%   1.3% 1.3%  
No. of shares       294.1 294.6  
Diluted earnings per share (Rs)*         3.3  
P/E ratio (x)*         40.7  
* On a trailing 12-months basis

What has driven performance in 2QFY11?
  • PTC managed a just 0.5% YoY growth in its net sales during 2QFY11. This was despite a strong 21% YoY growth in traded volumes, which stood at 7,730 m units during the quarter. However, the realisations on these volumes averaged Rs 3.19 per unit, down around 17% YoY and thus impacting the overall sales. For 1HFY11, PTCs trading volumes increased by 27% YoY.

  • PTCs operating margins improved to 1.5% in 2QFY11, from 1.2% in 2QFY10. This was helped by lower staff costs, which were subsequently a result of reversal of employee stock option expenses. Staff costs were in fact a negative figure during the quarter.

  • Despite the lacklustre showing on the sales front, PTC managed to grow its net profits by 29% YoY during 2QFY11. This was largely helped by the improvement in operating margins. Reduced taxes during the quarter also helped the growth in profits. PTCs effective tax rate stood at 27% during 2QFY11, as against 33% in 2QFY11.

What to expect?
At the current price of Rs 135, the stock is trading at a multiple of 30 times our estimated FY13 earnings. The management has maintained its view that the company is poised to grow at an average annual rate of 25-30% over the next few years. This is on the back of the power purchase agreements that it has signed over the past two years. PTCs 1HFY11 performance is fairly in line of meeting our full year FY11 targets. But based on current valuations, we maintain a cautious view on the stock.

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