Early birds on profit track

Sales growth rate marginally down but net profit grows 64%.

Net profits of 106 companies, which have declared their results so far for the July-September quarter, have grown by 64.05 per cent even though they have suffered a marginal slowdown in sales growth at 19.83 per cent.

The profit margins "" operating, gross as well as net "" have risen by over 4 percentage points. While the operating profit margin was up 4.12 percentage points to 23.92 per cent, the gross profit margin rose by 4.27 percentage points to 22.43 per cent. The net profit margin went up by 4.24 percentage points to 15.73 per cent. 
 

GROWTH STORY CONTINUES
(Rs Crore)	Sep-04	Sep-05	% Chng
Sales	12071.63	14465.41	19.83
Other income	230.08	348.16	51.32
Operating profit	2389.71	3460.68	44.82
Interest	197.54	216.42	9.56
Gross profit	2192.17	3244.26	47.99
Depreciation	395.07	472.75	19.66
Tax	358.41	454.27	26.75
Net profit	1387.12	2275.56	64.05
Operating profit margins	19.80	23.92	-
Gross profit margins	18.16	22.43	-
Net profit margins	11.49	15.73	-
No of companies : 106

Information technology companies were the first to announce their quarterly results and dominated the show. Nineteen IT companies that have announced results have posted 51.36 per cent growth in their net profit, riding high on a 24.17 per cent rise in sales.

Two companies in the two-wheeler segment, Bajaj Auto and Maharashtra Scooters, have shown an encouraging trend, posting an aggregate net profit growth of 58.63 per cent and a sales growth of 28.7 per cent.

In the pharmaceutical segment, Orchid Pharma and Fulford have posted a total net profit growth of 274 per cent on a sales growth of 43.8 per cent.

Owing to the other income, which has bloated the net profit of ACC, two cement companies "" ACC and Gujarat Ambuja Eastern "" have shown a net profit growth rate of 141 per cent.

The second-quarter performance of the early birds is encouraging their results in the last four quarters are analysed by using the same sample. Records of 85 companies in this group of 106 companies are available for the last five quarters.

These 85 companies have posted a net profit growth rate of 52.02 per cent during the second quarter of the current financial year "" substantially higher than their collective net profit growth of 31.52 per cent in the same quarter in 2004-05.

The 2006 second-quarter profit growth rate of this set of companies is higher than all the preceding four quarters except for the quarter ended March 2005, when their profit growth was 69.90 per cent.

However, the sales growth rate of these 85 companies during the quarter ended September 2005 has been lowest in the last four quarters.

They have posted a 18.25 per cent rise in sales in the quarter compared with a sales growth rate of 22.95 per cent in the first quarter of 2006, 22.28 per cent in the fourth quarter of 2005, 19.84 per cent in the third quarter of 2005 and 18.30 per cent in the second quarter of 2005. This means the profit growth has largely been triggered by the performance of information technology companies.

The performance of commercial banks has not been taken into account as the study focuses only on manufacturing and IT companies.