ACC posts better profit growth

QUARTERLY RESULT ANALYSIS: March 2005

Total expenditure went up by more than 12 per cent to Rs 1,246.59, with raw material costs moving up 26.40 per cent.

The company's operating profit was down 10.35 per cent to Rs 395.58 crore. Both operating profit margins and net margins declined by more than 400 basis points.

Revenues from the cement business rose 7.33 per cent to Rs 767.85 crore. Volumes of cement sales grew 4 per cent while realisations were higher by 3 per cent. However, the viscose staple fibre (VSF) business posted a 7.21 per cent fall in revenues to Rs 461.95 crore. VSF volumes were down 13 per cent, though a 5 per cent rise in prices offset the fall.

Revenue from the sponge iron business increased the most at 20.85 per cent to Rs 281.29 crore. Though volumes of sales were down 2 per cent for the segment, a 22 per cent improvement in realisations made up for the decline.

Grasim plans to acquire Canada-based St Anne Nackawic Pulp Mill in partnership with Tembec, an integrated forest products company. The company's investment in the proposed joint venture will be around Rs 32 crore.  Grasim plans to make investments of Rs 504 crore in its cement business during FY06 apart from Rs 290 crore in VSF, Rs 29 crore in sponge iron and Rs 27 crore in chemicals.  The synergies of acquisition of Ultra Tech Cement from L&T are likely to result in significant cost savings going forward. Despite the below par performance of the cement division, better demand and pricing for the sector are likely to improve margins.  The demand for VSF is also expected to increase going forward. Analysts expect the company to post earnings growth of 13 per cent in FY06 and 16 per cent in FY06. The stock trades at a trailing 12-month P/E of 11.9.  ASHOK LEYLAND
Higher other expenditure dents operating margins  Ashok Leyland posted higher net sales of Rs 1,459.2 crore, up 30.34 per cent, driven by a 16 per cent y-o-y growth in CV volumes and a 12.5 per cent growth in average realisations. 

Ashok Leyland
(Rs crore)	Q4FY05	Q4FY04	% change
Net sales	1459.2	1119.5	30.34
Other income	32.6	5.6	482.14
Operating profit	171	153	11.76
OPM (%)	11.7	13.6	-
Net profit	142.7	87.3	63.46
NPM (%)	9.7	7.7	-
EPS (Rs, not annualised)	1.2	0.73	-
12-month trailing P/E			10.12

 EBITDA (earnings before interest, tax, depreciation and amortisation) increased 11.7 per cent y-o-y to Rs 171 crore, but the EBITDA margin at 11.7 per cent fell y-o-y.

While raw material to net sales has remained flat at around 65 per cent, there has been a 35. 3 per cent increase in other expenditure to Rs 1,409.82 crore. Higher other expenditure - up at 9.7 per cent of net sales in Q4FY05 from 7.9 per cent in Q4FY04 - affected operating margins which dropped 200 basis points y-o-y.

Net profits were up 63.46 per cent to Rs 142.7 crore, driven by a higher non-operating income of Rs 32.6 crore which included the sales of the company's 6 per cent stake in Indusind Bank, estimated at Rs 26 crore.

A deferred tax credit of Rs 18.6 crore, compared with a tax of Rs 7.9 crore in Q4FY04, also contributed to PAT .

 While the rate of growth of CVs is likely to slow down, growth rate should remain in the region of 10-12 per cent in FY06.  The company is expected to regain some market share after it addresses capacity constraints. At the current price of Rs 23, the stock trades at a multiple of 9.2 times the estimated FY06 earnings of Rs 2.50.  Dr Reddy