Patels Airtemp India –Buy- Sharekhan
Patels Airtemp’s Q1FY2011 results showed top line having increased by 8.2% y-o-y to Rs16.6 crore. Conventionally, the first quarter is a sluggish quarter. The operating profit margin (OPM) improved by 430 basis points y-o-y to 22.2% in Q1FY2011 from 17.9% in the corresponding quarter of last year.
This was mainly due to increased manufacturing capacities, which reduced low- margin trading of goods, resulting in lower raw material cost as a percentage of sales. Consequently, the operating profit for the quarter rose by 28.2% to Rs3.5 crore.
The interest cost increased to Rs0.5 crore on account of rising working capital borrowings for the quarter. Further, the depreciation charge also increased to Rs0.25 crore due to the capex undertaken earlier in Q4FY2010. The net profit came in at Rs1.8 crore, a 12.1% year-on-year (y-o-y) increase.
Its order book improved to Rs68 crore from Rs61 crore in Q4FY2010. Order inflows worth Rs9 crore from GEA for Paradip Refinery Project helped boost the order book.
The surge in investments in the oil and gas, power and refinery sectors will augur well for the company. Also, the company is optimistic about the opportunities in the nuclear power sector. The outlook for the fertiliser sector remains bright with huge investments lined up in the sector. We maintain our estimates for FY2011 and FY2012 in view of better execution in subsequent quarters. We expect the top line to grow at a compounded annual growth rate of 19% over FY2010-12 along with sustenance of margins at the FY2010 level.
At the current market price, the stock is available at 4x FY2012E earnings. Given its low debt equity ratio of 0.2:1, dividend yield of 2%, and healthy return on net worth of 28.7%, the valuations appear quite attractive. We maintain our BUY recommendation on the stock.
Popularity: 3% [?]
Category: Broker tips
Subscribe
If you enjoyed this article, subscribe to receive more just like it.
