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MIRC: Feeling the heat - Views on News from Equitymaster
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  • Nov 28, 2001

    MIRC: Feeling the heat

    MIRC Electronics, the manufacturers of the Onida brand of colour televisions (CTVs), has reported a 7% fall in sales for the second quarter ended September 30, 2001. Thought net profit for 2QFY02 seems to have fallen by 17.3%, if one were to adjust for the other income component, profits have actually risen in the second quarter.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Net Sales 2,014 1,874 -7.0% 3,286 3,123 -5.0%
    Other Income 58 3 -94.5% 59 7 -88.2%
    Expenditure 1,887 1,738 -7.9% 3,050 2,893 -5.1%
    Operating Profit (EBDIT) 127 137 7.4% 236 230 -2.7%
    Operating Profit Margin (%) 6.3% 7.3%   7.2% 7.3%  
    Interest 58 35 -40.5% 99 81 -18.3%
    Depreciation 22 25 10.8% 40 46 15.1%
    Profit before Tax 105 81 -23.1% 156 110 -29.4%
    Tax 13 5 -64.6% 21 9 -56.7%
    Profit after Tax/(Loss) 92 76 -17.3% 135 101 -25.1%
    Net profit margin (%) 4.6% 4.1%   4.1% 3.2%  
    No. of Shares (m) 7.0 7.0   7.0 7.0  
    Diluted Earnings per share* 52.5 43.4   38.4 28.8  
    P/E Ratio   15.4     11.6  

    Fall in sales in 2QFY02 is more pronounced than the first quarter. Reportedly, the company has lost market share in the CTV segment, where it derives more than 93% of its revenues. During the first four months of the current year, MIRC's market share had fallen to 10.1% as compared to 11.3% in the corresponding period last year. Margins in 2QFY02 has gone up by 100 basis points due to a fall in material costs. Other income in 2QFY01 includes Rs 45 m towards remission of sales tax loan liability. If one were to exclude for this in both the quarters, net profit has gone up 114.7% in 2QFY02.

    First half snapshot…
    (% change) 1QFY02 2QFY02 1HFY02
    Sales -1.8% -7.0% -5.0%
    Operating profit -14.5% 7.4% -2.7%
    Net profit -42.3% -17.3% -25.1%

    MIRC is expect to report a rise in sales in 3Q & 4QFY02 on the back of favorable agricultural output and higher sales in the festive season. The industry already had shown signs of revival with sale of colour television (CTVs) increasing in July and August by 18% and 21% respectively compared with the corresponding period of the previous year. CETMA, the representative organisation of the durable industry, expects a 5% growth in durable sector for the current year. As per CMIE, CTV production between April '01 to August '01 has increased marginally by 1.8% to 0.9 m units. Though the fiscal could witness higher volume growth, value growth seems unlikely as CTV prices have already fallen by around 10% in 1HFY02 due to a sluggish demand scenario. Given the state of the economy and the competitive nature of the industry, pricing pressure is expected to remain in 2HFY02.

    The scrip is currently trading at Rs 167 on a P/E multiple of 11.6x annualised 1HFY02 earnings. The stock was trading at Rs 500 levels in May 2001 and the slowdown has resulted in a sharp correction on the bourses.



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