Marico, Dhampur Sugar Mills, Balrampur Chini Mills, Jammu & Kashmir Bank, Oriental Bank of Commerce and Deepak Nitrite are some of the companies whose PAT (profit after tax) margin has seen a consistent rise in the last four quarters (as of March 2019 quarter), data analysed from ACE Equity shows. However, the steady performance is not being reflected in their stock prices as most of the scrips have remained subdued or given negative returns during the period.
PAT margin is one of the important indicators of the financial health of the company. It is the percentage of revenue remaining after all operating expenses, interest and taxes have been deducted from a company's total revenue. However, it alone is not an exact measure of a company's performance or determinant of the effectiveness of its cost control measures, analysts suggest.
For instance, chemical manufacturing company Deepak Nitrite's net profit margin jumped 125 per cent over the last four quarters and it is the only company on the list which has outperformed the market during the period under review. Data fetched from ACE Equity show shares of the company gained over 18 per cent during the period (March 2018 quarter - March 2019 quarter). In comparison, the S&P BSE Sensex has gained nearly 13.5 per cent during this period.
On the flip side, The Jammu & Kashmir Bank has seen its PAT margin jumping 481 per cent. However, the stock of the lender has bled 31.49 per cent during March 2018 quarter - March 2019 quarter.
"Jammu & Kashmir Bank and Oriental Bank of Commerce (OBC) are turnaround companies and hence profit margin may not be the real indicator of the overall performance," explains AK Prabhakar, head of research at IDBI Capital. Also, Jammu & Kashmir Bank, even when it was doing very good, the stock never given stellar returns because of the tensions in Kashmir, he says.
The other companies that have made a turnaround at the PATM level in the last four quarters include Aster DM Healthcare, Balrampur Chini Mills, Dhampur Sugar Mills, Oriental Bank of Commerce and Rane Engine Valve. Indian Enery Exchange (IEX) and DCB Bank and Linde India are the other companies that saw a consistent rise in their PAT margin.
Among the consistent performers, FMCG (fast moving consumer goods) company Marico's PAT margin surged 237 per cent from 9.88 per cent in March quarter 2018 to 33.33 per cent at the end of March quarter 2019. Shares of the company, though, have risen only 7 per cent during the window.
The Mumbai-headquartered company had reported over two-fold increase in consolidated net profit at Rs 405 crore for the fourth quarter of 2018-19. Revenue from operations rose to Rs 1,609 crore for the March 2019 quarter, as compared to Rs 1,503 crore in the same period of 2017-18. Going ahead, while most of the FMCG companies are likely to take a hit owing to tough macr-economic conditions, Marico is likely to benefit from lower copra prices. Copra is one of the key raw materials used in the manufacture of hair oils.
Analysts at HDFC Securities, in their earnings preview note, have pegged 6 per cent domestic revenue growth for Marico for the June quarter with domestic volume growth of 6 per cent. International segment is expected to grow by 13 per cent.