This is worse than the 15 per cent reported in the September quarter on a sales growth of 30 per cent y-o-y. As a result, operating profit was almost flat at Rs 364 crore. The 23 per cent rise at the net level to Rs 345 crore, was primarily the result of higher other income. |
| Despite the company having taken a couple of price hikes, operating margins are likely to remain in the region of 15-16 per cent. In fact, margins are unlikely to improve significantly until the company launches the new platform that it has been talking about and moves out of the 100cc segment altogether. |
| The new platform will be unveiled sometime in June 2007 and the management says the bikes proposed to be manufactured""-bigger than 100cc ""will be far more profitable. |
| In line with the company's plan to move to higher-end bikes, three new bikes will be launched in six months, with the Pulsar 220cc having been launched already. Bajaj Auto, thus, expects to post volumes of between 3.25 and 3.5 million vehicles in FY08 compared with around 2.5-2.8 million in FY07. This includes around 100,000 scooters, of which the company sells 2,000 a month. |
| The three-wheeler segment has done well during the quarter with sales up 49 per cent y-o-y driven by exports which saw a rise of nearly 40 per cent y-o-y. The company continues to dominate the passenger segment where it has a share of 78 per cent. |
| At the current price of Rs 2770, the stock trades at 22.5 times FY07 estimated earnings and under 20 times FY08 estimated earnings. Clearly there is momentum in the top line. |
| However, with margin pressures unlikely to subside in a hurry, the stock could underperform for some time as it has in the last couple of months. |
| Triveni: Sweet and sour |
| Though the sugar business was a problem at Triveni Engineering in the December 2006 quarter, the engineering business came to its rescue to an extent. |
| Net sales improved 4.76 per cent y-o-y to Rs 307 crore and operating profit (including off-season expenses) declined 28.8 per cent to Rs 43.59 crore in Q3 FY07. |
| Operating profit margin fell 590 basis points y-o-y to 12.52 per cent. Even in the September quarter, its operating profit margin had fallen 390 basis points y-o-y to 18.3 per cent. |
| Sugar sales declined 12 per cent due to a 19.5 per cent fall in despatches to 95,000 tonne. |
| As inventories were lower in October 2006 on a y-o-y basis, the company had to despatch sugar manufactured during the quarter, which has lower recoveries, resulting in higher costs. |
| Average sugar prices too declined 1 per cent y-o-y to Rs 17 a kg. Sugar segment margin (at the profit before interest and tax) fell by 726 basis points to just under 3 per cent. |
| However, its steam turbines business saw revenues double y-o-y to Rs 114 crore in Q3 FY07, and its contribution to the overall revenues increased to 31.2 per cent in Q3 FY07 compared with 17.7 per cent a year earlier. Segment profitability in steam turbines improved by 588 basis points to 21.5 per cent. Even in co-gen, segment profit improved by 113 per cent y-o-y. |
| Going forward, Triveni's engineering business, is likely to drive growth in both top line and margins. Sugar margins too are likely to rise as recoveries improve, along with higher co-gen revenues. |
| The company has an order book of Rs 470 crore for turbines to be delivered over the next nine months. Its gear and water treatment businesses have order backlogs of Rs 40 crore and Rs 30 crore respectively for deliveries by June 2007. |
| It is also increasing its sugar capacity by 20,500 tonne crushed per day along with a second 23 MW co-gen plant and 160 kl a day distillery. |
| The stock has been an underperformer "" losing over 55 per cent since mid-May 2005, as sugar stocks have been weak, but trades at about 10-11 times estimated FY07 earnings, given the increasing share of profits from non-sugar businesses. |
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