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Bajaj Hindusthan: Gains from lower input cost - Views on News from Equitymaster
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Bajaj Hindusthan: Gains from lower input cost
Dec 21, 2009

Performance summary
  • Sales grow by 6% YoY during 4QFY09 (financial year ended September), declines 1% YoY during FY09.
  • Operating (EBITDA) margins stood at nearly 36% during the quarter, as compared to an operating loss in 4QFY08. Improvement driven by lower raw material costs, lower losses due to foreign exchange fluctuation and fall in other expenditure.
  • Net profit margin stood at 14% during the quarter, aided by higher operating income and lower interest costs.
  • Net profit margin for FY09 stood at 8.6% as compared to a loss in FY08.


Financials
Rs(m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
Net sales 4,768 5,032 5.5% 17,944 17,807 -0.8%
Expenditure 5,007 3,231 -35.5% 15,843 12,216 -22.9%
Operating profit (EBDITA) (239) 1,801   2,100 5,591 166.2%
EBDITA margin (%) -5.0% 35.8%   11.7% 31.4%  
Other income 2 1   85 342 301.2%
Interest 590 261 -55.9% 1,394 1,871 34.2%
Depreciation 488 514 5.3% 1,872 2,022 8.0%
Profit before tax (1,316) 1,028   (1,081) 2,040  
Tax (441) 337   (580) 514  
Profit after tax/(loss) (875) 691   (502) 1,526  
Net profit margin (%) -18.3% 13.7%   -2.8% 8.6%  
No. of shares (m) 141 177   141 177  
Diluted earnings per share (Rs)*         8.6  
Price to earnings ratio (x)*         24.7  
* 12 month trailing earnings

What has driven performance in 4QFY09?
  • Bajaj Hindusthan’s sales grew by 6% YoY during 4QFY09. This was a result of higher sugar sales as well as higher other operating income. Sales of the sugar segment increased by 4% helped by higher realisations. Other operating income increased by 544% YoY.

  • Operating income of the company stood at Rs 1,801 m during the quarter as compared to a loss in 4QFY08. This sharp improvement was driven by lower raw material costs and other expenditure. Raw material costs fell by 26% YoY while other expenditure fell by 82% YoY during the quarter. The company also reported a lesser amount of loss from foreign exchange trading during the quarter which helped boost operating income.

  • On the EBIT front, margins for the sugar segment stood at 15% after recording a loss during 4QFY08. This improvement came on the back of higher sugar realisation due to a shortfall in sugarcane production. EBIT margins for the distillery segment fell from 36% in 4QFY08 to 12% in 4QFY09.

    Segment wise performance
    Rs (m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
    Sugar 3,937 4,096 4.0% 15,780 15,395 -2.4%
    % of total revenues 83.8% 98.0%   79.9% 90.3%  
    EBIT % -8.5% 14.5%   -3.8% 10.4%  
    Distillery 731 84 -88.6% 2,675 834 -68.8%
    % of total revenues 15.6% 2.0%   13.5% 4.9%  
    EBIT % 36.4% 12.1%   22.0% -8.2%  
    Power 31 1 -98.4% 1,302 822 -36.9%
    % of total revenues 0.7% 0.0%   6.6% 4.8%  
    EBIT %       68.2% 58.9%  
    Total revenues 4,699 4,180 -11.0% 19,757 17,051 -13.7%

What to expect?
At the current price of Rs 213, the stock is trading at a multiple of 24.7 times its trailing 12-months earnings. The company has done well during the quarter thanks to higher sugar prices. With sugarcane shortage expected to continue, the company will continue to reap the benefit of higher prices. However, any decision regarding sugarcane prices will affect the company.

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