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Pratibha Inds: On a steady path - Views on News from Equitymaster
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Pratibha Inds: On a steady path
Nov 11, 2011

Pratibha Industries has announced the second quarter financial results of financial year 2011-12 (2QFY12). The company has reported an 18.8% YoY and a 20.1% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 18.8% YoY during 2QFY12. Revenue growth was led by 26.9% YoY growth in the Infrastructure & Construction (I&C) segment. However, revenues from manufacturing segment declined by 14.8% YoY.
  • Operating profits increased 13.1% YoY during 2QFY12. However, operating margins declined by 70 bps (0.7%) due to increase in employee expenses as a percentage of sales.
  • Net profits increased 20.1% YoY due to the strong performance at the operating level, increase in other income and decline in tax expenses.
  • Currently, the order book of the company stands at Rs 53.3 bn. Approximately 55% of the order book caters to the water segment, 32% comprises of buildings segment while the balance 13% comprises of the urban infrastructure segment.

Standalone financial snapshot
(Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
Sales 2,439 2,898 18.8% 5,493 5,880 7.0%
Other operating income 18 12 -32.7% 28 52 84.4%
Expenditure 2,086 2,490 19.4% 4750 5039 6.1%
Operating profit (EBDITA) 371 420 13.1% 772 894 15.7%
Operating profit margin (%) 15.1% 14.4%   14.0% 15.1%  
Other income - 10   1 10  
Interest 144 167 16.0% 294 349 18.8%
Depreciation 36 45 25.9% 70 88 25.9%
Profit before tax 191 217 13.8% 409 467 14.0%
Tax 55 54 -1.8% 111 117 5.4%
Profit after tax/(loss) 136 163 20.1% 299 350 17.1%
Net profit margin (%) 5.5% 5.6%   5.4% 5.9%  
No. of shares (m)         99.4  
Basic & diluted earnings per share (Rs)         3.5  
P/E ratio (x) *         5.3  
* On a trailing 12-months basis

What has driven performance in 2QFY12?
  • Net sales increased by 18.8% YoY in 2QFY12 led by I&C segment. Revenues from I&C segment increased by 26.9% YoY as execution pace amongst the ongoing projects gathered momentum. However, revenues from the manufacturing segment declined by 14.8% YoY.

    Segmental Break up
    (Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
    Infrastructure & Construction            
    Revenue 2,217 2,813 26.9% 5,136 5,629 9.6%
    % share 89.0% 92.0%   91.3% 91.9%  
    PBIT margin 14.3% 13.2%   13.0% 14.1%  
    Manufacturing            
    Revenue 275 234 -14.8% 489 486 -0.7%
    % share 11.0% 7.7%   8.7% 7.9%  
    PBIT margin 10.3% 6.9%   11.3% 8.2%  
    Others             
    Revenue  - 10   1 10 922.1%
    % share NA 0.3%   0.0% 0.2%  
    PBIT margin NA 100.0%   100.0% 100.0%  
    Total  2,491 3,057 22.7% 5,626 6,125 8.9%
    Less: Inter-segment revenue 34 137   103 182  
    Total            
    Revenue 2,457 2,920 18.8% 5,523 5,943 7.6%
    PBIT margin 14.0% 13.6%   13.1% 14.2%  

  • Operating profits increased by 13.1% YoY in 2QFY12. However, they have not kept pace with the topline growth as the company hired new employees which resulted in an increase in personnel expenses. As a result, operating expenses increased to 85.6% (as a percentage of revenues) in 2QFY12 from 84.9% in 2QFY11.

  • Bottom line registered a 20.1% YoY growth on the back of strong performance at the operating level. Increase in other income and fall in tax expenses also boosted profitability growth. Nonetheless, interest expenses increased by 16.0% YoY due to stretched working capital cycle. (debt is taken to meet working capital requirements)

What to expect?
It may be noted that in an environment where majority of the construction companies have faced execution issues Pratibha Industries has managed to register an 18.8% YoY growth in top-line during the quarter. The company also managed to add orders of approximately Rs 20.5 bn till date and has target to end the year with an order book of Rs 60 bn. Based on the healthy order pipeline, management expects revenue growth to be in the region of 20-25% for FY12. Further, we believe that the company will also be able to maintain its margin profile through selective bidding. Thus, considering the strong growth prospects and attractive valuations, we maintain our positive view on the stock.

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