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MTNL: Margins squeezed

Nov 2, 2000

In spite of the ongoing restructuring in the telecom sector Mahanagar Telephone Nigam Ltd. (MTNL) has reported strong topline growth. This is a much improved performance compared to the first quarter of the current year (10% topline growth).

(Rs m)2QFY002QFY01Change
Sales 12,200 15,212 24.7%
Other Income 630 775 23.0%
Expenditure 6,870 9,372 36.4%
Operating Profit (EBDIT) 5,330 5,841 9.6%
Operating Profit Margin (%)43.7%38.4% 
Interest 40 17 -56.3%
Depreciation 1,950 1,933 -0.9%
Profit before Tax3,9704,66517.5%
Tax 740 191 -74.2%
Profit after Tax/(Loss) 3,230 4,474 38.5%
Net profit margin (%)26.5%29.4% 
No. of Shares (eoy) (m) 630.0 630.0  
Diluted Earnings per share*20.528.4 
P/E Ratio 5.1 
*(annualised)   

Although operating profits are up the OPM has dropped sharply by 530 basis points. The company's staff cost has almost doubled over 2QFY00. This may be due to the new wage agreement entered into with retrospective effect (FY98), which locks in wages for the next eight years. Network charges for the company have also increased substantially. Consequently, operating costs have increased.

Historically, the company has traded at a multiple of 15.8. At Rs 144 the company is trading on a multiple of 5.1 on 2QFY01 annualised earnings.

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