The key takeaway from IPCL's March quarter results is that the petrochemical cycle is still very strong. The company has reported a 133.75 per cent growth in its profit before tax and extra-ordinary items to Rs 374 crore in the last quarter. As a result, the stock was up 6 per cent in contrast to the broad selloff witnessed in Tuesday's trading. |
Prices of key polymers such as low density polyethylene were up 24 per cent on a y-o-y basis in the March quarter, while for linear low density polyethylene had risen 19 per cent. |
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Analysts point out that signs of demand revival from user industries were visible in the last quarter vis-a-vis the earlier quarter. Average polymer prices in the March quarter of FY05 were lower than the December quarter and this helped improve demand. |
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As a result, net turnover (excluding trading sales) grew 64.25 per cent last quarter. And although raw material costs also jumped "" naphtha prices have jumped about 16 per cent on a y-o-y basis in the last quarter - operating margin rose thanks to an improvement in realisations. Operating profit jumped 71.5 per cent to Rs 530 crore last quarter. |
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With the petrochemical cycle expected to remain strong in the near term, the company is attempting to leverage this by expanding capacity at its facilities at Gandhar and Vadodara. |
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Going by IPCL's results, it looks like parent company Reliance would also report strong results helped by buoyant conditions in the petrochemicals division coupled with strong refining margins for the refinery division. |
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Siemens India |
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Siemens India has reported a 54.3 per cent growth in its profit before tax to Rs 114.52 crore in the March quarter. However, Siemens Building Technologies Pvt. Ltd. was amalgamated with the company in Oct 2003 and the results for the March quarter of FY04 include SBT's performance for the six month period from Oct-March. |
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Adjusted for this, growth would be even higher. Operating profit margin for the combined entity grew 268 basis points to 12.52 per cent last quarter. |
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The facts about the upturn in the capex cycle are well-known and it has helped the Siemens stock to outperform the broader market this year-this stock gained 45.8 per cent vis-a-vis a 5.1 per cent decline in the Sensex. |
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This upturn in capex has helped revenues of the power division expand by 99.37 per cent and that of the automation and drives business by 37.8 per cent. An improved operating environment has also helped the MNC's unexecuted order book value to grow 36 per cent to Rs 2676 crore at the end of the March quarter. |
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Like other players in the capital goods sector, Siemens operating costs have also risen-higher steel prices have led to raw material costs jumping 63.8 per cent to Rs 517.8 crore and personnel costs have also risen 42.37 per cent. A larger turnover has however, helped minimise this impact. |
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Going forward, the UPA government's emphasis on expanding the rural electricity network, should help the company's power division maintain its growth. |
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Also Siemens India plans to invest $500 million (approximately Rs 2200 crore ) in the country over the next 3-4 years for expanding its production capacities, as well as augmenting its R&D capabilities and hiring more software professionals. |
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This move is expected to help Siemens India leverage the uptick in the domestic capex cycle as well as expand its role in the global operations of its parent. |
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Staid data from HCL Technologies |
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HCL Tech reported lacklustre results for the third quarter in a row. The company's key software services business, which accounted for 78 per cent of revenues year-till-date, grew just 3.3 per cent sequentially in the March quarter. |
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In the previous two quarters the growth rates were -1 per cent and 6 per cent. In the nine month period till March 2005, revenues of the software services business has grown by 26.8 per cent, much lower than industry growth rates. |
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Growth in the division's operating profit was equally bleak last quarter, with margins remaining flat at the December quarter levels of 24 per cent. |
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HCL Tech's BPO and infrastructure management divisions made up for the lack of growth in the software services business. While BPO revenues grew 17.9 per cent sequentially, infrastructure management services grew 24.1 per cent over the December quarter. |
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As a result, total revenues grew 7.1 per cent last quarter. HCL Tech's BPO business has grown in double-digits sequentially for the past three quarters. What's more, the division enjoys an operating margin of 23.5 per cent, in line with the profitability of the software services division. |
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Despite the fact that it accounts for only around 15 per cent of total revenues, the BPO division accounted for almost 45 per cent of last quarter's incremental operating profit. |
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Yet, it's the performance of the much larger software services division that's causing concern, simply because its performance will determine whether growth will be sustainable in the future. |
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HCL Tech's share price has fallen over 6 per cent since the results were announced. The fall wasn't sharper simply because of the company's liberal dividend payout policy. |
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Based on its current share price, the dividend yield works out to an attractive 4.6 per cent. On the other hand, upside has been limited because of lacklustre performance. |
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With contributions from Amriteshwar Mathur and Mobis Philipose |
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