Man Industries` pipe dream

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Net profit

FY0198.541.13 FY02173.453.49 FY03274.0612.33 FY04501.7439.32  MIL has been witnessing a significant rise in sales and profits in the last three years. Its turnover in 2000-01 was Rs 100 crore. It went up to Rs 175 crore in 2001-02 and to Rs 275 crore in 2002-03. For FY03-04, the company registered a growth of 83 per cent in turnover to Rs 501.74 crore, over the Rs 274.06 crore recorded in the corresponding period of the previous year. Net profit jumped 218 per cent to Rs 39.32 crore from Rs 12.33 crore in the same period. Man's cash profit stood at Rs 48.21 crore for the period against Rs 21.36 for the full year 2003. EPS for the year (as on March 31, 2004) at Rs 20.80 is up by 219 per cent over previous year.   

Financials
(Rs Cr)	FY04	FY03	% Chg
Sales	501.74	274.06	83.08
Operating profit	75.66	37.09	103.99
OPM (%)	15.08	13.53	1.55
Net profit	39.32	12.33	218.90
Net margin	7.84	4.50	-
EPS (Rs)	20.80	6.52	-
Trailing 12-month EPS (Rs)	25.49	-	-
Price-earnings ratio	3.67	-	-

 MIL has a gamut of high profile foreign clients like Saudi Aramco and Shell besides domestic giants. Exports were rather sizeable last year, contributing Rs 220 crore and accounting for 70 per cent of revenues. However, it says its focus in the domestic market in the current year would not result in exports contributing a like margin this year, too.  The company says margins are almost similar in both exports and domestic sales. The size may vary on a case-to-case basis. However, they say the size of the pie is much bigger abroad. If 100,000 kms of pipeline is coming up next five years, India would form one fifth of this demand. Mansukhani claims that the company is trying to increase the exports quantum worldwide. "In 2003, the share of exports were around 70 per cent. This year's contribution was very low which is why we are putting up another plant," he says.  Analysts say huge fluctuations occur due to the project-based nature of the industry in which the project the company is focusing on becomes very important. Man Industries plans to have a 50-50 approach - i.e. 50 per cent domestic market and 50 per cent exports. It aims to grow its total turnover to Rs 1,000 crore in FY05.  Analysts say, besides having client approvals in the past as a huge positive for future orders, MIL has one of the lowest project costs in the world. Its cost per project is around $35 million compared to an average project cost of $70-90 million for its competitors. "Lower project costs would have an effect on production costs, too," says Mansukhani. "We have small equity and debts but higher turnover even as other economic variables are the same as our competitors. This is our strength which would be reflected in our balance sheet in the future," he adds.  According to analysts, the only blot on the horizon is going to be lower margins than the ones currently enjoyed by the company. But, that is an industry-related phenomenon applicable to its competitors. "Though all the players in the SAW pipes industry are expected to be flush with orders, margins are expected to come down a bit. That is because the high margins the players enjoyed so far are expected to come down to more realistic levels," says Mehraboon Irani, vice-president - equity, at Darashaw Stock broking.