Balrampur Chini: Sweet timing

Balrampur gains from improved volumes and higher sugar prices

Balrampur Chini, like other industry players, has benefited from higher sugar prices and improved volumes. Operating profit has grown 46.9 per cent y-o-y to Rs 118.96 crore in the March 2006 quarter.

However, the quarterly numbers are not strictly comparable with the corresponding period of the previous year, as the company in its distillery division had discontinued potable alcohol production in March 2005.

In its key sugar division, the management said they sold 15.5 lakh bags of sugar in the last quarter compared with 8.9 lakh bags a year earlier. Realisations were at Rs 18.4 per kg in the March 2006 quarter compared with Rs 17.13 a kg a year earlier. As a result, segment revenue of sugar division rose 82.1 per cent y-o-y to Rs 330.38 crore in the last quarter.

Also, state advised price of sugarcane went up to Rs 115 a quintal in the last quarter compared with Rs 107 a quintal a year ago. However, enhanced sugar sales helped segment profit rise 75 per cent y-o-y to Rs 91.91 crore in the last quarter.

Meanwhile, in the co-generation division, improved plant load factor in the March 2006 quarter helped segment profit rise 23 per cent y-o-y to Rs 18.15 crore.

Nevertheless, operating profit margin fell 249 basis points y-o-y to 35.87 per cent in the last quarter, given the discontinuation of production of potable alcohol.

The company's sugar complex at Mankapur, with 7000 tonne crushed per day (TCD) is expected to come on stream by November 2006. Its current capacity is pegged at 47,000 TCD. The stock trades at 18.3 times estimated FY07 earnings, given the strong investor interest for the sector.

Finolex Cables: Electric numbers

For Finolex Cables, Q4 FY06 was a good quarter. Operating profit increased by 91.8 per cent y-o-y with sales growth of 59.3 per cent to Rs 223.24 crore. Segment revenues of electrical cables went up by 46 per cent, while revenues of communication cables increased by 42.6 per cent.

However, the results of Q4 FY06 are not strictly comparable as Finolex merged Finolex Wire Products (segment revenue of Rs 83.1 crore) and Finolex Finance were merged with the company.

Though there was pressure on raw material front, especially owing to higher copper prices, with adjusted cost of raw materials increasing 43 basis points to 72.29 per cent, the company managed to pass on the costs.

As a result, operating profit margin increased by 211 basis points to 12.47 per cent in Q4 FY06. Owing to higher demand for electrical cables, it converted its JFTC facilities to produce electrical cables. Finolex will be introducing electrical switches and CFLs this quarter.

Going forward, demand for its products will be strong given the increased activity in engineering and construction sectors. At its current price of Rs 361, the stock trades at 17 times FY07 EPS, and factors in growth prospects.

Tamil Nadu Newsprint: On a roll

Tamil Nadu Newsprint and Paper (TNPL) has reported an excellent performance for Q4 FY06. Higher volumes and better realisation saw sales rise by 21 per cent y-o-y in the March 2006 quarter as well as for FY06.

In spite of a 52 per cent rise in its adjusted cost of raw materials, the company managed to post a 116.75 per cent increase in operating profit as most other expenses fell in the quarter. As a result operating profit margins went up by over 1000 basis points to an impressive 24.31 per cent during the quarter.

Volumes increased by about 10 per cent, while paper prices, which have risen around 6-7 per cent over previous quarter, also helped revenue growth.

For the full year too, operating profit growth was robust at 81.6 per cent, resulting in a 700 basis point improvement in operating profit margin to 21.09 per cent.

In FY06, TNPL production went up by 17 per cent to 2.3 lakh tonne, operating at 100 per cent capacity utilisation. Higher margin copier paper production at 37,645 tonne, fell short of the targeted 40,000 tonne.

It is now increasing its pulp capacity from 520 tonne a day to 800 tonne per day and increase its production capacity from 2.3 lakh tonne a year to 2.45 lakh tonne a year.

In Q4 FY06, its bio-methanation plant registered as a clean development mechanism and by the end of 2005, the company had earned almost 83,000 carbon credits.

Going forward, demand and prices of paper are expected to be strong, though the newsprint price hike of Rs 1,250 is unlikely to make much impact on revenues as the contribution of newsprint to revenues, which was 4 per cent, has gone down further. At the current price of Rs 130, the stock trades at 8.6 times FY07 EPS and 6.9 times FY08 EPS.