• OUTLOOK ARENA
  • VIEWS ON NEWS
  • OCTOBER 28, 2002

Polaris: Holding ground

While Polaris’ numbers for 2QFY03 look very disappointing at the first glance, a deeper analysis reveals some positives. The steep 35% decline in bottomline has largely stemmed from a steep drop in other income. The revenues are up 8% QoQ.

A steep ramp up in marketing costs has taken a toll on the company’s operating margins. The profits at an operating level have fallen by a marginal 2%. If the ramp up in marketing expenses is towards creating a strong infrastructure, then the move is a smart one. Since future growth of the industry will be based on volumes, it is imperative that smaller players like Polaris get a robust marketing infrastructure in place.

The disappointment with the results could also be stemming from the fact the company had indicated of a 17% to 25% growth in topline from its existing businesses. However, for 1HFY03 the company’s revenues have grown by only 2%. Thus, the 25% organic growth in revenues now seems to be a rather distant dream.

(Rs m) 1QFY03 2QFY03 Change 1HFY02 1HFY03 Change
Sales 705 759 7.6% 1,437 1,464 1.9%
Other Income 45 8 -81.8% 55 54 -2.5%
Expenditure 566 622 10.0% 1,135 1,188 4.7%
Operating Profit (EBDIT) 140 137 -2.1% 302 276 -8.6%
Operating Profit Margin (%) 19.8% 18.0%   21.0% 18.9%  
Interest - 0   - 0  
Depreciation 26 33 25.3% 48 59 25.1%
Profit before Tax 159 112 -29.7% 310 270 -12.8%
Tax 15 19 25.3% 11 34 210.1%
Profit after Tax/(Loss) 144 93 -35.4% 299 236 -20.9%
Net profit margin (%) 20.4% 12.2%   20.8% 16.1%  
Diluted number of shares 51.2 51.2   51.2 51.2  
Diluted Earnings per share* 11.2 7.2   11.7 9.2  
*(annualised)            
P/E (x)   23.3     18.3  

The company added 6 new clients during the quarter, taking the base of total active clients to 105. In another move, the company has changed the ratio for its merger with Orbitech in favour of Polaris shareholders. The merger ratio will now be 42.65: 100 as compared to 14:25 previously.

At the current market price, the stock is trading at a P/E multiple of 18x its 1HFY03 estimated earnings. The valuations are on the higher side considering the company’s performance. While others from the industry have managed to post a strong growth in revenues, the company’s performance has been significantly weak in this aspect.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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