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Disappointing 2QFY12 results
Crompton’s 2QFY12 consol PAT came 25% below our estimates, at
Rs1.17bn (down 45% YoY). Across all the three divisions of the
standalone entity, revenue growth disappointed and Ebit margins
contracted on both YoY and QoQ basis. Ebitda margins of international
subs improved QoQ but profitability was hurt by higher depreciation and
interest costs. Working capital for the standalone entity increased from
6% of revenues in Sep-10 to 16% (8% to 14% for consol entity).
Management’s earlier guidance of flat profits in FY12 now appears nearly
impossible. We will revise down our earnings estimate and target price
post the analyst meet tomorrow; a 10-20% EPS cut looks likely.
Consol PAT 25% below estimates
Crompton’s 2QFY12 consol PAT fell by 45% YoY, to Rs1,167m - 25% below
our expectation. Revenues rose by 13% YoY, even as standalone revenues
remained flat, on account to strong international revenues (up 32% YoY). A
part of this growth was contributed by new acquisitions. Ebitda margins,
however, contracted by 555bps YoY to 8.4% (our expectation: 9.8%), due to
a 623bps increase in material costs. While Ebitda margin of 5% for
international subs was in-line with our expectation, a 487bps margin decline
in the standalone entity surprised negatively. As a result, Ebitda fell by 32%
YoY, to Rs2.3bn, 13% below estimates.
Poor performance by the standalone entity
The performance of standalone entity was extremely disappointing. In all the
three segments, revenue growth was slower than expected and operating
margins fell YoY and QoQ. In particular, power revenues fell by 7% YoY while
its Ebit fell 40% YoY (-6% QoQ). Material and employee costs rose by 405bps
and 100bps YoY respectively, leading to a sharp 490bps decline in standalone
Ebitda margins. Despite robust revenues (up 32%YoY/ 29%QoQ), helped
partly by forex and acquisitions, international subs contributed only a modest
Rs60m to consol PAT due to higher depreciation and interest costs.
Sharp WC rise; earnings/ TP downgrade likely post analyst meet
Net working capital increased sharply for both the standalone entity (from 6%
of revenues in Sep-10 to 16% now) and consol entity (from 8% to 14%).
Consol net debt rose by Rs5bn over last year (from Rs2.3bn to Rs7.3bn) on
account of higher working capital and acquisitions. Management’s earlier
guidance of flat profits for FY12 now implies 43% YoY profit growth in 2H
which appears nearly impossible in this environment. We would revise our
earnings and target post the analyst meet tomorrow, where we would look to
get clarity on the reasons for sluggish performance of standalone entity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Disappointing 2QFY12 results
Crompton’s 2QFY12 consol PAT came 25% below our estimates, at
Rs1.17bn (down 45% YoY). Across all the three divisions of the
standalone entity, revenue growth disappointed and Ebit margins
contracted on both YoY and QoQ basis. Ebitda margins of international
subs improved QoQ but profitability was hurt by higher depreciation and
interest costs. Working capital for the standalone entity increased from
6% of revenues in Sep-10 to 16% (8% to 14% for consol entity).
Management’s earlier guidance of flat profits in FY12 now appears nearly
impossible. We will revise down our earnings estimate and target price
post the analyst meet tomorrow; a 10-20% EPS cut looks likely.
Consol PAT 25% below estimates
Crompton’s 2QFY12 consol PAT fell by 45% YoY, to Rs1,167m - 25% below
our expectation. Revenues rose by 13% YoY, even as standalone revenues
remained flat, on account to strong international revenues (up 32% YoY). A
part of this growth was contributed by new acquisitions. Ebitda margins,
however, contracted by 555bps YoY to 8.4% (our expectation: 9.8%), due to
a 623bps increase in material costs. While Ebitda margin of 5% for
international subs was in-line with our expectation, a 487bps margin decline
in the standalone entity surprised negatively. As a result, Ebitda fell by 32%
YoY, to Rs2.3bn, 13% below estimates.
Poor performance by the standalone entity
The performance of standalone entity was extremely disappointing. In all the
three segments, revenue growth was slower than expected and operating
margins fell YoY and QoQ. In particular, power revenues fell by 7% YoY while
its Ebit fell 40% YoY (-6% QoQ). Material and employee costs rose by 405bps
and 100bps YoY respectively, leading to a sharp 490bps decline in standalone
Ebitda margins. Despite robust revenues (up 32%YoY/ 29%QoQ), helped
partly by forex and acquisitions, international subs contributed only a modest
Rs60m to consol PAT due to higher depreciation and interest costs.
Sharp WC rise; earnings/ TP downgrade likely post analyst meet
Net working capital increased sharply for both the standalone entity (from 6%
of revenues in Sep-10 to 16% now) and consol entity (from 8% to 14%).
Consol net debt rose by Rs5bn over last year (from Rs2.3bn to Rs7.3bn) on
account of higher working capital and acquisitions. Management’s earlier
guidance of flat profits for FY12 now implies 43% YoY profit growth in 2H
which appears nearly impossible in this environment. We would revise our
earnings and target post the analyst meet tomorrow, where we would look to
get clarity on the reasons for sluggish performance of standalone entity.
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