| But analysts were disappointed by the 17 per cent growth in revenues from international operations (difference between consolidated and standalone numbers, since most subsidiaries operate overseas). At the beginning of the year, international operations were expected to grow 20-25 per cent. |
| One of the reasons for the lower than expected growth was that there wasn't much investment happening in the US and UK markets last year, which led to a slowdown in the company's order booking. Besides, some of the order booking got shifted, resulting in a hit in the top line last year. This is reflected in the huge increase in order backlog last year. |
| As on April 1, 2004, the company's backlog on a consolidated basis stood at Rs 683 crore, a 167 per cent jump compared to the backlog of Rs 256 crore at the end of FY03. Order backlog now stands at 85 per cent of the previous year's revenues compared with just 35 per cent at the beginning of last year. |
| The upshot of having this huge order backlog is that one can expect a much better performance in FY05. The company told analysts that it expects revenues to grow 40 per cent this fiscal. The key question is whether earnings growth will keep pace, and whether margins will hold. |
| Last fiscal, margins slipped around 50 basis points because of a decline in the company's water business, higher steel prices and the appreciation of the rupee. Steel prices have come off their highs, but are still above year-ago levels. |
| However, Thermax has the ability to raise prices to avoid a drastic hit on margins. Besides, the rupee has been giving up its gains, which is good news for the company's international business. In summary, Thermax can be expected to at least maintain margins, given the expected buoyancy in revenues. |
| Based on FY05 estimates, the stock gets a discounting just around 10 times. What's more, the company has almost Rs 100 per share in liquid investments. |
| Adjusting for this, the valuation would obviously be much lower. At the same time, the stock has jumped three times in the last year or so, which means that any upside would happen in a more measured way. |
| Tata Power's mixed numbers |
| Tata Power's results for the quarter ended March 2004 are a mixed bag. Although total income increased 14.6 per cent to Rs 1042 crore, net profit declined 65 per cent to Rs 54.35 crore. |
| Also, operating profit margin fell a massive 800 basis points. A key factor that contributed to the drop in profit and margin was a charge of Rs 72.11 crore on account of foreign currency liabilities relating to prepayment of loans from external sources. |
| Investor sentiment in power sector shares has been hit following the decision of the recently elected Congress government in Andhra Pradesh to introduce free power to farmers. |
| As a result, the Tata Power share has declined approximately 22 per cent in the last 17 days compared with around 5 per cent decline in the Sensex. |
| In the key power business, revenue rose 9.2 per cent last quarter. This was largely achieved through expansion of customer base outside Maharashtra, especially to the Madhya Pradesh Electricity Board last quarter. The company has also been working on reducing dependence on high-cost liquid fuels by using more coal. |
| Tata Power has been expanding its other businesses which include project consultancy and broadband services. Revenues jumped up 195 per cent to Rs 80.76 crore. And it resulted in the segment's profitability rising 43 per cent to Rs 3.62 crore in March 2004. |
| Other states could follow the populist act of Andhra Pradesh. Analysts said such a move should have no direct impact on private sector power companies as their operations are concentrated in urban areas. |
| The move could weaken the balance sheets of private power companies' key customers, the state electricity boards. For private power companies, this could mean delay in receipt of dues from boards. |
| With contributions by Mobis Philipose and Amriteshwar Mathur |
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