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Result Analysis

NESTLE INDIA

Nestle India has put up quite a good performance for the first quarter ended March 2003. At Rs 598.10 crore (Rs 530 crore) net sales were up 13 per cent over the corresponding previous quarter (24 per cent sequentially). Operating expenditure went up 15 per cent over the corresponding previous quarter to Rs 466.84 crore (Rs 405.30 crore) (sequentially it rose by 14 per cent). Though there has been significant revenue growth, rising costs have cut into the margins. At Rs 131.26 crore (Rs 124.70 crore) operating profit went up by about 5 per cent over the corresponding previous quarter. OPM at 22 per cent was 2 percentage points below the year-ago period up from the 15 per cent it reported during the December quarter. At Rs 11.05 crore (Rs 4.60 crore) other income was up by a huge 140 per cent over the year-ago period (up 37 per cent sequentially). A 16 per cent rise in the tax provisioning (up by 130 per cent over the December quarter figure) saw net profit rise by 13 per cent on a year-on-year basis to Rs 86.69 crore (Rs 76.80 crore). On a sequential quarter basis, net profit was up 77 per cent. The stock currently trading at Rs 540 discounts its March quarter annualised EPS of Rs 35.96 by 15 times. Nestle is witnessing one of the lowest valuations for an MNC that is growing steadily.

RANBAXY LABORATORIES

Ranbaxy is now reaping the benefits of its global expansion strategy. For the first quarter ended March, net sales was Rs 1,089.70 crore (Rs 571 crore), up 91 per cent over the corresponding previous quarter, while sequentially the same went up by 30 per cent over the December quarter sales of Rs 837 crore. Exports have been its strength throughout and the same were up 153 per cent over the corresponding previous quarter (up 56 per cent sequentially). OPM leaped to 31 per cent from a mere 15 per cent during the corresponding previous quarter and 24 per cent during the preceding quarter. Other income was Rs 5.60 crore (Rs 3.30 crore), up 70 per cent from the corresponding previous quarter. Ranbaxy’s before tax profits at Rs 329.80 crore was up 402 per cent from the year-ago period. Net profit was Rs 274.90 crore (Rs 38.50 crore) up 614 per cent from the corresponding previous quarter and 32 per cent up from the December quarter profits of Rs 207.80 crore. The company earned an extraordinary income of Rs 4.90 crore, which if considered, would have taken the profits up by 195 per cent over the corresponding previous quarter. The stock currently trading at Rs 639 discounts its March quarter annualised EPS of Rs 59.28 by just 11 times. Still undervalued on a long-term basis.

HINDALCO INDUSTRIES

A V Birla group company Hindalco has put up a very dull performance for fiscal 2002-03. Net sales at Rs 4,975.50 crore (Rs 4,569.40 crore) were up 9 per cent over last year. The rise in operational costs was much higher than the increase in revenues. At Rs 3,763.10 crore (Rs 3,068.30 crore) these were up 23 per cent from the year-ago period. Operating profits for the year declined by 19 per cent over the last year to Rs 1,212.40 crore (Rs 1,501.10 crore). The OPM too fell sharply to 24 per cent against 33 per cent it reported last year. Other income at Rs 234.50 crore (Rs 220.90 crore) was 6 per cent up from last year, while further consolidation came in from a 34 per cent saving in the interest cost over the comparable period, which stood at Rs 120.10 crore (Rs 182.60 crore). Depreciation went up 11 per cent to Rs 264.20 crore (Rs 238.30 crore). Pre-tax profits declined by 18 per cent over the comparable period to Rs 1,062.60 crore (Rs 1,301.10 crore), which in effect brought down the tax provision by 15 per cent to Rs 317.30 crore (Rs 375 crore). The net profit at Rs 745.30 crore (Rs 926.10 crore) was 20 per cent down from the year-ago period. The stock is currently trading at Rs 642 discounting its full year EPS of Rs 100.04 by six times.

DIGITAL GLOBALSOFT

In the fourth quarter, Digital reported a 30 per cent growth in revenues at Rs 121.47 crore (Rs 93.77 crore). Operating profit rose 14 per cent over the corresponding previous quarter, but sequentially it was down 4 per cent. OPM at 27 per cent was sharply down from the 31 per cent it reported during the corresponding previous quarter. Falling depreciation, a negligible interest cost and a fair amount of tax provision saw the net profit rise by 13 per cent on a year-on-year basis and 11 per cent sequentially to Rs 30.04 crore (Rs 26.58 crore). A slowdown in growth rates has hit the stock hard, which has been struggling for quite some time now. Currently trading at Rs 539 it discounts its March quarter EPS of Rs 36.43 by 15 times.

Company        Total Income       Net profit        Equity       O. Income       EPS*

Nestle        598.10       86.69       96.42       11.05       35.96 Ranbaxy       1089.70       274.90       185.50       5.60       59.28 Hindalco # #        4975.50       582.00       74.50       234.50       100.04 Digital GlobalSoft #        121.47       30.04       32.98       5.67       36.43

Figures in Rs crore; * annualised; # # Full year review, # Q4 results

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