Jitendra Kumar Gupta Moneycontrol Research
With the first quarter results at its peak, a number of good results may not have popped up in investors' radar.
In bid to uncover these outperformers, Moneycontrol Research took a dive into the earnings season.
Most companies we shortlisted are operating in promising industries and have decent balance sheets as well as return ratios. While they require further research before any investment decisions can be taken, here is the result analyses that could serve as a good starting point.
KSB Pumps, which supplies pumps to major industries such as oil & gas, waste treatment, water processing and construction industries, saw close to 21 percent spurt in its revenues led by higher demand.
Despite higher input cost, the company’s EBITDA grew by 20 percent to Rs 28.6 crore. While interest cost at Rs 50 lakh in June quarter grew at 150 percent, it is still comfortable. Moreover, cash and investments in the book helped the company generate higher other income, negating some of the fixed cost impact. Overall, the other income during the quarter grew by 38 percent to Rs 9.8 crore helping KSB post a good 40 percent growth in net profit to Rs 21.4 crore.
Stainless steel sales tend to grow faster than other types of steel, and Jindal Stainless has been one of the big beneficiaries of this. During the quarter ended June 2018, the company posted a strong 51 percent growth in stainless steel sales volumes to 2.17 lakh tonne. This was largely on account of higher capacity utilisation led by debottlenecking of its existing facilities.
This, along with marginal improvement in the realisations, resulted in the company posting a strong 56 percent growth in sales to Rs 3146.8 crore. Moreover, EBITDA and net profit grew in similar fashion at 50 percent and 119 percent respectively.
The company is turning around its operations with focus on productivity and is reducing its debt. In FY17, its EBITDA would have taken 5 years for the company to retire its net debt. This has improved to 3.7 years in FY18 and 3.3 years in Q1FY19 as a result of the reduction in debt and improvement in operating profits.
Everest Industries, which has been making efforts to reduce its variable and fixed costs, has been able to drive profitability higher. During the June quarter, the company reported 10.2 percent growth in revenues but EBITDA expanded by 33 percent to Rs 43 crore. It is a result of better utilisation and lower cost, which helped drive operating margins to over 10 percent.
Moreover, the company’s intense efforts to restructure debt and repay the same is yielding good results. To put things into perspective, during June quarter, its interest cost fell to Rs 1.49 crore as against Rs 4.17 crore in the corresponding quarter last year.
Nevertheless, because of the cost reduction measures, the company was able to post a robust 73 percent growth in net profits to Rs 29.4 crore, which works out to about Rs 120 crore on an annualised basis, quite good for a company which has got a market capitalisation of about Rs 767 crore. But the stock has fallen marginally over the apprehensions about the recent resignation by company’s chief financial officer.
The Murugappa group owned company Wendt India, which is into the grinding tools and machines has benefited as a result of revival in demand from industries such as automobile, engineering, bearing, steel, mining, ceramics and glass.
During the June quarter, it reported a good 27 percent growth in sales. Standalone sales grew 31 percent largely on account of growth in domestic demand.
While volumes and product mix helped the company in terms of generating higher revenues, control over cost, economies of scale and better pricing boosted its EBITDA by 105 percent to Rs 9.8 crore.
This reflected in better profitability with the company reporting a strong 136 percent growth in consolidated profits to Rs 5.4 crore during the quarter ended June 2018.
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