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Pratibha Ind: Margin expansion boosts profits - Views on News from Equitymaster
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Pratibha Ind: Margin expansion boosts profits
Oct 30, 2010

Pratibha Industries has announced 2QFY11 results recently. The company has reported 22.6% YoY and 27.9% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 22.6% YoY during 2QFY11. Revenue growth was led by 20.7% YoY growth in the construction segment. However, revenues from the saw pipe manufacturing segment declined 33.0% YoY.
  • Operating profits increased 35.2% YoY during 2QFY11.
  • Despite strong growth in operating profits, net profits increased 27.9% YoY due to higher interest and tax expenses.

Consolidated financial snapshot
(Rs m)  2QFY10   2QFY11  Change  1HFY10   1HFY11  Change
Sales 2,102    2,578 22.6%        4,725    5,852 23.9%
Other operating income  5  18 251.9%      21  29 38.1%
Expenditure 1,820    2,208 21.3% 4147 5071 22.3%
Operating profit (EBDITA)    287       388 35.2%   599       810 35.2%
Operating profit margin (%) 13.7% 15.1%   12.7% 13.8%  
Other income        -     -            0    1 234.1%
Interest       99       149 50.9%   198       305 53.7%
Depreciation       41  42 3.8%      63  83 31.6%
Profit before tax 148 197 33.4% 339 424 25.3%
Tax 41 61 47.6% 93 126 35.7%
Profit after tax/(loss) 106 136 27.9% 246 299 21.3%
Net profit margin (%) 5.1% 5.3%   5.2% 5.1%  
No. of shares (m)           83.4  
Basic earnings per share (Rs) (Not Annualised)         3.6  
P/E ratio (x) *         10.5  
* On a trailing 12-months basis

What has driven performance in 2QFY11?
  • Net sales increased 22.6% YoY in 2QFY11. Growth in the top line was led by strong execution during the quarter. Revenues from the construction segment increased 20.7% YoY. However, revenues from the saw pipe manufacturing segment declined 33.0% YoY during the quarter. On a QoQ basis revenues have declined 21.3% due to prolonged monsoons which stalled construction activity. The company continues to maintain its supremacy in the water supply and irrigation segment and the current order book provides revenue visibility for the next 3-4 years.

  • Operating profits registered strong growth of 35.2% YoY in 2QFY11. Operating margins expanded from 13.7% in 2QFY10 to 15.1% in 2QFY11 on the back of decline in operating expenses as a percentage of revenues. Operating expenses declined from 86.6% (as a percentage of revenues) in 2QFY10 to 85.6% in 2QFY11.

  • Despite strong growth in operating profits, bottom line registered 27.9% YoY growth due to increase in tax rates and interest expenses. Effective tax rate increased from 28% in 2QFY10 to 31% in 2QFY11 while interest expenses increased as the company piled up debt during 1HFY11.

What to expect?
At the current price of Rs 77 the stock trades at 6.9 times our estimated FY13 earnings. Considering attractive valuations and the recent under-performance we believe the stock offers a good investment opportunity from 2-3 year perspective.

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Feb 23, 2018 (Close)


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