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Pratibha Industries: Material costs play spoilsport - Views on News from Equitymaster

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  • Nov 4, 2008 - Pratibha Industries: Material costs play spoilsport

Pratibha Industries: Material costs play spoilsport
Nov 4, 2008

Performance summary
  • 2QFY09 sales grow by 103% YoY, 129% YoY for 1HFY09.

  • EBIDTA margins drop by 8% YoY, on account of higher raw material costs and stock related adjustments.

  • Net profits increase by 57% YoY during 2QFY09, 74% YoY for the half-year.



Consolidated performance snapshot
(Rs m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Sales 959 1,942 102.5% 1,704 3,894 128.5%
Expenditure 800 1,775 121.8% 1,453 3,517 142.1%
Operating profit (EBDITA) 159 167 5.3% 252 377 49.8%
Operating profit margin (%) 16.6% 8.6% 14.8% 9.7%
Other income 0 25 9005.9% 0 38 9910.5%
Interest 71 58 -18.5% 84 135 61.7%
Depreciation 10 13 41.0% 13 26 96.7%
Profit before tax 79 121 53.3% 155 253 63.5%
Tax 11 15 31.7% 27 31 13.4%
Profit after tax/(loss) 67.5 106.0 57.0% 127 222 74.3%
Net profit margin (%) 7.0% 5.5% 7.5% 5.7%
No. of shares (m) 16.7
Earnings per share (Rs) * 26
P/E ratio (x)* 3.6
* On a trailing 12-month basis

What has driven performance in 2QFY09?
  • Pratibha Industries (PIL) recorded a 103% YoY topline growth led by strong growth in both its segments Ė infrastructure & construction (I&C) and manufacturing. Excluding inter-segment revenues, the I&C segment recorded a revenue growth of 169% YoY while its manufacturing segment grew by 132% YoY. During 2QFY08, the I&C segment contributed nearly 79% of the revenues, while the balance was added by the manufacturing unit. This ratio has marginally shifted to 81 to 19 in favour of the former during the quarter. Coming to margins of these segments, the latest quarter was bleak for PILís I&C division as its EBIT margins collapsed to 6.4% as compared to 20.9% in 2QFY08. As for its manufacturing unit, its margin dropped marginally by 0.3% YoY to 9.1% during 2QFY09.

    (Rs m) 2QFY08 2QFY09
    Infrastructure & construction
    Revenue 756 2,033
    % share 78.8% 80.8%
    PBIT margin 20.9% 6.4%
    Manufacturing
    Revenue 203 471
    % share 21.1% 18.7%
    PBIT margin 9.4% 9.1%
    Unallocated 0 13
    Total*
    Revenue 959 2,516
    PBIT Margin 18.5% 7.1%
    * Excluding inter-segment adjustments; includes other income

  • While PILís revenues grew at a strong pace during the quarter, its expenses grew at a quicker pace (122% YoY). This sharp increase in expenses led to a mere 5% growth in operating profits and a sharp drop in operating margins. The main reason for this was the higher raw material costs (as a percentage of sales), which increased to 89.5% of sales as compared to 82.1% in 2QFY08.

  • Inspite of a lackluster performance at the operating level, PIL managed to achieve a 57% YoY growth in its net profits. This was mainly on account of higher other income and lower interest and depreciation costs. During the quarter, its net profit margins dropped by 1.5% YoY to 5.5%. As for its half year performance, PIL has managed to record a bottomline growth of 74% YoY.

What to expect?
    At the current price of Rs 95, the stock is trading at a multiple of 3.6 times its trailing 12-month earnings. We will update PILís research report soon.

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