MICO: Good times

Boom in key user industries has propped up MICO's operating income by 20.77 per cent

MICO, a leading manufacturer of diesel injection systems and spark plugs, has reported an improved performance in the December 2006 quarter, thanks to the current boom from key user industries""commercial vehicles and tractors.

As a result, its operating income increased 20.77 per cent, and its operating profit grew 22.5 per cent y-o-y to Rs 196.48 crore in Q4 CY06.

Its operating profit margin also grew 30 basis points y-o-y to 18.7 per cent in the last quarter.

According to the segment results, sales of its automotive products division (comprising 84.9 per cent of total revenues) grew 16.2 per cent to Rs 890.49 crore in Q4 CY06.

This division also benefited from increased outsourcing to its parent, Bosch. However, in CY06, the company's overall operating profit margin declined 50 basis points y-o-y to 20.7 per cent.

This pressure on MICO's margins in CY06 was due to other expenses surging 46.15 per cent y-o-y to Rs 779.3 crore. Thankfully, some of this expenditure is of one-time nature.

At the net level, the numbers would have been better but for the fact that MICO changed its depreciation policy, which reduced the profit before tax for CY06 by Rs 28.4 crore to Rs 798 crore.

The stock has under-performed over the past three months "" it has dropped 10 per cent during this period, as compared to a 6 per cent fall in the Sensex.

Going forward, the demand conditions from its key user industries are expected to remain strong. The MICO stock trades at about 18 times CY07 earnings and could do better than the broad market.

Syngenta: Making steady profits

The Swiss parent of Syngenta India is planning to buyback the 15.98 per cent stake that it does not own and de-list the stock from domestic bourses. Syngenta is primarily involved in crop protection products.

The parent, which owns 84.02 per cent, has fixed the buyback price at Rs 351.8 per share, which is marginally higher than the average 26-week stock price before this announcement.

For CY06, Syngenta India's operating profit remained more or less steady on a y-o-y basis to Rs 107.5 crore, as compared with an 8.3 per cent growth in net sales to Rs 831.3 crore.

Its operating profit margin fell 110 basis points y-o-y to 12.9 per cent in the previous financial year. This pressure on margins was due to purchase of finished goods jumping 72.5 per cent y-o-y to Rs 176.1 crore in CY06.

The Syngenta stock has appreciated over 50 per cent in the past three months, and has out-performed the market.

Clearly, with the government focusing on boosting agricultural production and productivity, it should help to ensure strong demand for Syngenta's product repertoire that includes wheat herbicide and insecticides. For investors, there is little incentive to exit at Rs 351.8, when the stock trades at Rs 443 on the BSE.