• JULY 3, 2000

Atlas Copco, Ingersoll Rand: Who's better?

Consider this: both Ingersoll Rand and Atlas Copco are among India's leading compressor and mining and construction equipment companies. Both companies are subsidiaries of MNCs and both are trading at near their 52 week lows. But the similarity ends here.

Their operational performances are in stark contrast to each other.

FY2000 Ingersoll Atlas Copco
Sales (Rs m) 3,894 1,157
Operating Profit Margin (%) 16.0% 10.6%
Profit after Tax (Rs m) 524 68
Net profit margin (%) 13.5% 5.9%
Earnings per share (Rs) 16.6 9.4
P/E Ratio (X) 11.2 11.4
Market Price (Rs m) 186 107
52-week high/low (Rs) 569/180 272/107
Market cap to sales (X) 1.51 0.67

While Ingersoll's market capitalisation (current price X shares outstanding) is 1.5 times its sales, the same ratio for Atlas Copco is a much lower 0.7 times. The market is in other words, is giving a higher value to Ingersoll's sales. This is because Ingersoll earns more on each rupee sale compared to Atlas Copco, underlining the company's inherent strengths.

In the last couple of years both companies have faced difficult market conditions and have reported staid growth. Both have undertaken restructuring of business operations and are trying to cut costs, the effects of which are likely to be felt in the coming years.

With the economy showing signs of improving, infrastructure development is likely to be at the heart of India's development. As the construction and industrial activities pick up, these two companies are likely to benefit. But as indicated above Ingersoll Rand is more profitable than Atlas Copco and therefore will continue to attract a premium on the bourses vis-a-vis Atlas Copco.

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