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ICICI Securities recommends hold on Punjab Tractors

Published on Thu, May 18, 2006 at 11:51 | Source : Moneycontrol.com

Updated at Thu, May 18, 2006 at 12:14

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Broking house, ICICI Securities has reiterated a hold on Punjab Tractors .

The ICICI Securities report on Punjab Tractors

"Punjab Tractors (PTL) recorded lacklustre results in Q4FY06, which were as per our estimates. While net sales inched up 6.8% YoY to Rs2.5bn, recurring net profit was largely flat at Rs 211mn as margins continued to be under pressure. The company has declared a dividend of Rs10.5/share (which includes a special dividend of Rs 4.5). We believe while the tractor segment would maintain its buoyant growth, PTL would continue to underperform the industry. "

"We also remain concerned over the company's high debtor levels and declining market share. Further, we believe PTL's valuations factor in most of the upside. Reiterate HOLD."

"Revenue growth of 6.8%. The company registered a muted revenue growth of 6.8% YoY to Rs2.5bn on the back of a 4.9% YoY increase in volumes in Q4FY06E."

"EBITDA margin contracts 50bps YoY. PTL's EBITDA margin declined 50bps YoY to 15.2% as the other expenses to sales ratio rose 90bps YoY to 6.1%. However, this was mitigated, to some extent, by the staff cost to sales ratio declining 40bps to 7.3%. The EBITDA increased just 3.5% YoY to Rs383mn."

"Net profit remains flat. A muted 3.5% YoY increase in EBITDA coupled with a 2.2x increase in interest expense and 110bps YoY increase in the tax rate to 37.5% led to the net profit remaining flat at Rs211mn."

" We believe while the tractor segment would maintain its buoyant growth, PTL would continue to underperform the industry. We also remain concerned over the company's high debtor levels and declining market share; PTL lost market share by 110bps in FY05 and 120bps in April '05-January '06. Further, we believe PTL's valuations factor in most of the upside. Reiterate HOLD."