Jitendra Kumar Gupta Moneycontrol Research
We have highlighted investment ideas to our esteemed investors from time to time. Post the earnings report it might be prudent to revisit those names. While some of our recommended companies have surpassed our expectations, for a few others, the quarter turned out to be a dull one. We nevertheless see no fundamental change in our thesis and continue to repose faith in these businesses from a medium to long term perspective.
Despite 10 percent increase in sales, Allcargo reported 1 percent decline in its net profit to Rs 62.3 crore as weak volume growth led to lower utilisations. Its multi transport operation (MTO) which accounts for 85 percent of the revenue witnessed 12 percent year-on-year growth in volumes, but the fall in volume in its CFS business and EBIT loss of Rs 4 crore in project and engineering business resulted in a subdued performance at the net level. Nevertheless, MTO business will drive growth and its plans to scale other businesses and monetise its land bank would ease some of these short-term issues in the coming months.
During the quarter, Shivam Autotech reported over a five-fold jump in its net profit to Rs 5.65 crore as against Rs 0.95 crore in the corresponding quarter last year. The company reported a decent 13.2 percent growth in revenues. However, a large part of profit growth was driven by a tax credit of Rs 3.53 crore and increase in other income. Nevertheless, the core profitability based on PBIDT of Rs 23.70 crore grew by 48.3 percent. Total expenditure rose by 17 percent, largely on account of 22 percent increase in raw material cost and 25 percent spike in employee cost.
Shakti Pumps, which is into agricultural pump segment, reported 14 percent reduction in sales to Rs 67.19 crore. While the company controlled its cost and improved operating margins by 270 basis points, net profit fell by 35 percent to Rs 3 crore as a result of higher tax and increase in depreciation on account of recent capacity addition.
Contrary to Shakti, Roto Pumps reported 17 percent increase in revenues, which is largely on account of its exposure to exports and industrial pumps. On a higher sales, because of increase in capacity utilisation, the company was able to contain costs leading to spurt in operating margins to 25 percent in Q2FY18 as against 19.7 percent in Q2FY17. This is also a reason profits doubled during the quarter to Rs 2.81 crore as against Rs 1.34 crore in Q2FY17.
IG Petrochemicals, which is the largest manufacturer of phthalic anhydride in India, reported 5.5 percent decline in revenues largely on account of plant shutdown for about 30 days. The impact would have been higher had the company not used its old inventories. Nevertheless raw material costs too fell by 24 percent, which could be again as a result of inventory adjustments. Overall, this boosted margins and net profit grew by 66 percent on a year-on-year basis to Rs 33.61 crore.
Along with higher crude oil and international coal prices, lignite (used for fuelling power plants) prices, too, are rising. GMDC, which is the key player in this segment, saw 46 percent quarter-on-quarter and 22 percent year-on-year increase in realisation to Rs 1975 per tonne. This along with 55.6 percent increase in lignite volumes to 1.7 million tonnes, resulted in strong 40 percent increase in sales to Rs 346 crore. However, because of reduction in other income, total income increased by a more modest 23 percent.
Expenditure grew by 34 percent leading to pressure on margins. Operating margins dropped significantly from 50 percent last year to 38.21 percent in the Q2FY18. Nevertheless because of the control on fixed costs like depreciation, interest and tax credit, the company was able to post strong 55 percent growth in net profit to Rs 113 crore.
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