X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GTL: Rupee impairs profits - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 23, 2004

    GTL: Rupee impairs profits

    Introduction to results
    Global Tele-systems Limited (GTL) had recently reported results for the quarter and half ending September 2004. While the company has reported decent topline growth for both the periods, bottomline for 2QFY05 has dipped on account of a sharp reduction in other income. Margins have also come under pressure.

    Financial performance (consolidated): A snapshot
    (Rs m) 1QFY05 2QFY05 Change 1HFY04 1HFY05 Change
    Sales 1,705 1,811 6.2% 3,029 3,516 16.1%
    Other income 228 (28)   (42) 200  
    Expenditure 1,200 1,293 7.8% 2,048 2,494 21.8%
    Operating profit (EBDIT) 505 518 2.5% 982 1,021 4.1%
    Operating profit margin (%) 29.6% 28.6%   32.4% 29.1%  
    Interest - -   - -  
    Interest 24 45 85.2% (38) 68  
    Depreciation 223 220 -1.0% 550 443 -19.4%
    Profit before tax 486 224 -54.0% 427 710 66.1%
    Extraordinary items - -   - -  
    Tax 26 33 24.3% 19 59 212.2%
    Profit after tax/(loss) 460 191 -58.5% 409 651 59.3%
    Net profit margin (%) 27.0% 10.5%   13.5% 18.5%  
    No. of shares 71.3 71.3   71.3 71.3  
    Diluted earnings per share* (Rs) 25.8 10.7   11.5 18.3  
    P/E ratio (x)         5.8  
    (* annualised)            

    About the company
    GTL has been one of the poor performers in the Indian software industry in the past few years, and this has put it in a tough position vis-ŗ-vis its competitors. However, the company has moved on from being a hardware player to one executing turnkey projects for voice and data networks. The companyís offerings include network engineering (48% of revenues) and IT services (52%). The latter includes services such as enterprise solutions and customer management services.

    What has driven performance in 2QFY05?
    IT services aid topline growth:  Growth in GTLís 2QFY05 topline is a result of growth in the IT services division (52% of revenues). Notably, this segment has grown sequentially by 4.2% in 2QFY05, from a sequential decline of 0.6% in 1QFY05. However, the network engineering business (48% of revenues) has come under pressure in this quarter and revenues from the same have grown sequentially by 8.5% (16.1% QoQ in 1QFY05). This segment has been a consistent performer for GTL over the past few quarters and a slowed growth in the same is a cause of concern.

    Employee costs affect margins:  Higher personnel costs have impacted GTLís operating margins in 2QFY05. These costs, which were 19% of revenues in 1QFY05, have increased to 21% in this quarter. Cost of sales has, however, declined as a percentage of sales in 2QFY05, thus paring the decline in operating margins for the company.

    Exchange losses impact profits:  A sharp decline in other income has led to the decline in 2QFY05 profits for GTL. This has been due to Rs 28 m of exchange losses in the quarter, from Rs 228 m of exchange gains in 1QFY05. Depreciation of the rupee vis-ŗ-vis the US dollar has been the result of these exchange losses and has been the case with almost all Indian software companies in 2QFY05.

    Performance in recent times
      3QFY04 4QFY04 1QFY05 2QFY05
    Sales growth (QoQ, %) 2.9 11.6 6.5 6.2
    OPM (%) 30.3 28.1 29.6 28.6
    Profits (QoQ, %) 61.1 (36.8) 128.5 (58.5)
    Revenue growth - Segments        
    Network Engineering (QoQ, %) 28.7 19.4 16.1 8.5
    IT Services (QoQ, %) (9.2) 6.4 (0.6) 4.2

    What to expect?
    At the current price of Rs 106, GTLís stock is trading at a price to earnings multiple of 5.8 times annualised 1HFY05 earnings. The stock has traditionally traded at much lower multiples as compared to its peers and there are reasons for the same, the foremost being the consistent poor performance of the company in the past couple of years. We have reiterated a number of times that management in one of the most important criteria for success of a technology business and as such, the managementís inability to clearly visualize growth prospects is a big concern for GTL. Investors should thus practice utmost caution. There are better stocks to be picked from the sector.

     

     

    Equitymaster requests your view! Post a comment on "GTL: Rupee impairs profits". Click here!

      
     

    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    HCL Tech: Ends FY17 on Expected Lines (Quarterly Results Update - Detailed)

    Jun 29, 2017

    Volvo partnership caps a good year for HCL Technologies.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    GTL LTD SHARE PRICE


    Aug 21, 2017 (Close)

    TRACK GTL LTD

    • Track your investment in GTL LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    GTL LTD 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE GTL LTD WITH

    MARKET STATS