ICI – Focus is the key - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

ICI – Focus is the key

Dec 1, 2000

ICI India is a diversified company with interests in paints (decorative as well as industrial paints), textile auxiliaries, chemicals and pharmaceuticals. Towards realigning its diversified businesses, the company sold its explosives business and is currently divesting its industrial paint division. This division would be a 50:50 joint venture with Berger Paints, the third largest paint manufacturer in the country. Sales declined by 15% for the first half of the current year. The hive off of the explosives division, which contributed towards 13% of the turnover last year, affected the sales. We expect sales to decline for the coming quarters as well in view of the prospective hive off of its industrial paints, rubber chemicals and pharmaceutical divisions. However, the worrying factor is the sharp fall in operating margins from 11.2% in 1HFY00 to 8.8% in 1HFY01, despite the fact that operating margins for explosives division were very low.

(Rs m) 1HFY00 1HFY01 Change
Sales 4,758 4,062 -14.6%
Other Income 216 27 -87.5%
Expenditure 4,157 3,800 -8.6%
Operating Profit 601 262 -56.4%
OPM (%) 12.6% 6.5%  
Interest 109 12 -89.0%
Depreciation 124 112 -9.7%
Profit before Tax 584 165 -71.7%
Other Adjustments      
Tax 135 51 -62.2%
Profit after Tax/(Loss) 449 114 -74.6%
Net profit margin (%) 9.4% 2.8%  
Earnings per share 22.0 5.6  

However, margins have shown notable improvement for paints (40% of FY00 turnover) and textiles auxiliaries (13% of FY00 turnover) divisions. We do not expect this trend to continue as competition has intensified. In the textile auxiliaries business, the company is a very small player, which means that the company does not adequate pricing power. Therefore, we expect the company to post around 15% drop in turnover for the full year (FY01). Margins are also expected to decline from 6.6% in FY00 to 5% in FY01.

One of the critical issues that are looming over the prospects of the paint sector is the rise in rutile titanium dioxide prices (more than 80% of the requirement of the industry is imported) and drought situation in three states. Even for the rubber chemicals division, excess capacity and falling realisations have pressurized margins and is expected to continue. But, on the upside, there are some favorable aspects to look forward to. The company has good brands (Dulux) in the decorative segment and also has commendable market share in Eastern parts of India.

The company has proposed to venture into fragrance and starch businesses (in line with its parent company ICI Plc), which has further raised apprehension about the focus of the company. Besides, ICI India has been in the restructuring mode for more than a decade. Going by the company’s plans, it looks likely that the company will restructure continually. This, we think is definitely a big negative.

The stock is currently trading at Rs 97 at a P/E multiple of 16.6x the annualised 1HFY01 earnings.

Equitymaster requests your view! Post a comment on "ICI – Focus is the key". Click here!

  

More Views on News

AKZO NOBEL Announces Quarterly Results (1QFY22); Net Profit Up 474.7% (Quarterly Result Update)

Aug 16, 2021 | Updated on Aug 16, 2021

For the quarter ended June 2021, AKZO NOBEL has posted a net profit of Rs 759 m (up 474.7% YoY). Sales on the other hand came in at Rs 6 bn (up 142.3% YoY). Read on for a complete analysis of AKZO NOBEL's quarterly results.

AKZO NOBEL 2020-21 Annual Report Analysis (Annual Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

Here's an analysis of the annual report of AKZO NOBEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of AKZO NOBEL. Also includes updates on the valuation of AKZO NOBEL.

AKZO NOBEL Announces Quarterly Results (4QFY21); Net Profit Up 37.3% (Quarterly Result Update)

Jul 8, 2021 | Updated on Jul 8, 2021

For the quarter ended March 2021, AKZO NOBEL has posted a net profit of Rs 742 m (up 37.3% YoY). Sales on the other hand came in at Rs 8 bn (up 34.4% YoY). Read on for a complete analysis of AKZO NOBEL's quarterly results.

Asian Paints vs Berger Paints: Which is Better? (Views On News)

Dec 2, 2021

These companies are competing head on to grab the largest pie of a Rs 500 bn market.

Asian Paints Touches Record High After Stellar Quarterly Results (Views On News)

Jul 22, 2021

Asian Paints shares scaled fresh 52-week high today, before paring gains as the company's topline soared 91.1%.

More Views on News

Most Popular

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

These 5 Penny Stocks are Held by Rakesh Jhunjhunwala. Worth a Look? (Views On News)

Jan 18, 2022

Rakesh Jhunjhunwala is holding these penny stocks in his portfolio for several years now.

Tech Mahindra's CTC Acquisition: Too Expensive? (Views On News)

Jan 18, 2022

Tech Mahindra's acquisition of European IT-company fails to excite investors.

Time to Buy Energy Stocks (Fast Profits Daily)

Jan 14, 2022

Energy is a sector that looks set to take off. It's time to get in.

5 Hidden Tata Group Companies to Add to Your Watchlist (Views On News)

Jan 18, 2022

Here's all you need to know about these five Tata group stocks that aren't as popular as the others.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

AKZO NOBEL SHARE PRICE


Jan 25, 2022 (Close)

TRACK AKZO NOBEL

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

AKZO NOBEL - AKZO NOBEL COMPARISON

COMPARE AKZO NOBEL WITH

MARKET STATS