Interest Hurts Saw Pipes

The fall in net profit was mainly due to the fact that while the other income" component increased marginally, there was a sharp increase in the interest burden.

The performance on the sales front, however, was much brighter, and the company has achieved 44 per cent growth which has been much higher than the previous year's growth of 20 per cent.

Operating profit margins too have witnessed a marginal drop. With a 41 per cent increase in operating profit to Rs 94.13 crore, operating profit margins declined from 19.11 per cent to 18.77 per cent.

But profitability at the net level was affected badly due to a 168 per cent jump in interest burden to Rs 42.55 crore.

 

The interest cost has risen on account of the higher term loans taken for the funding of its Nashik plant.

These results, however, did not hurt the stock. This is probably because the stock had already suffered a heavy setback before the announcement of the results.

The stock crashed immediately after the company deferred its GDR issue for the third time in the first week of July this year. The issue was to part-finance its 5 lakh mt unit at Goa. Since then the stock has dropped by more than 50 per cent.

As far as the current year is concerned, with a good order book position, the company can maintain its sales growth. Revenues from the Nashik spiral pipe plant with a capacity of 1 lakh mt, is expected to give a boost to the turnover. Since interest outgo continues to be higher, margins may suffer at the net

level.

Even if profitability improves dramatically, the stock is unlikely to witness a similar trend as the stock does not hold any market fancy.

Despite being the largest player in its field, the company's stock is traded around a P/E multiple of around 4.5.