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Bharat Bijlee: The slide continues - Views on News from Equitymaster

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Bharat Bijlee: The slide continues

Nov 4, 2008

Performance summary
  • Topline grows 11% YoY during 2QFY09, 2% YoY during 1HFY09.
  • Operating margins contract by almost 5% YoY during the quarter. This is on account of substantial rise in raw material and other costs (both as percentage of sales).
  • Net profits decline by 24% YoY during the quarter on the back of pressure on operating profitability. Lower other income and higher depreciation also spoil matters for the company.


Financial performance snapshot
(Rs m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Sales 1,359 1,509 11.0% 2,515 2,565 2.0%
Expenditure 1,100 1,297 17.8% 2,057 2,220 7.9%
Operating profit (EBDIT) 259 212 -18.0% 457 344 -24.7%
Operating profit margin (%) 19.0% 14.1%   18.2% 13.4%  
Other income 6 4 -31.7% 15 9 -43.0%
Interest expense/(income) 6 10   14 15 4.3%
Depreciation 9 13 48.8% 17 25 49.4%
Profit before tax 251 194 -22.9% 442 313 -29.1%
Tax 88 69 -21.5% 152 112 -26.5%
Profit after tax/(loss) 164 125 -23.7% 290 201 -30.5%
Net profit margin (%) 12.0% 8.3%   11.5% 7.9%  
No. of shares       5.7 5.7  
Diluted Earnings per share (Rs)*         114.1  
P/E ratio (x)*         7.0  
* On a trailing 12 months basis

What to expect?
At the current price of Rs 795, the stock is trading at a multiple of 7 times its trailing 12 months earnings. We shall await more details from the company before completing this analysis. Overall, Bharat Bijlee’s performance has come in way below our estimates and as such we shall have to revise the same downwards. While the stock is trading at attractive levels if one were to take a decision on the current price, we take onus of the fact that we went wrong in our initial estimates for the company.

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