Crompton: Good show

The company's standalone operating profit grew 44.7 per cent y-o-y to Rs 104.5 crore in the last quarter.

Crompton Greaves reported an improved performance in the June 2007 quarter because of good showing across its businesses "" power systems, consumer products and industrial systems. Also, improved management of its operational costs helped improve its margins in the last quarter.

As a result, the company's standalone operating profit grew 44.7 per cent y-o-y to Rs 104.5 crore in the last quarter, while its adjusted net sales rose 21 per cent to Rs 896.1 crore. Its operating profit margin also expanded 200 basis points y-o-y to 11.7 per cent in Q1 FY08.

In the company's key power systems division, improved sales for its transformers and switchgears, helped segment profit of this division rise 59.4 per cent y-o-y to Rs 49.9 crore in the last quarter.

Considering that about 40 per cent of this division's revenues are derived from overseas markets, the improvement in segment profits despite the 7 per cent sequential rise in the rupee is noteworthy.

Meanwhile, the company's consolidated operating profit was Rs 122.4 crore in the last quarter, while its net sales were Rs 1,522.6 crore.

Its earlier acquisition, Belgium-based Pauwels, saw its revenues rise by 17 per cent y-o-y to Rs 570 crore in the last quarter, while Hungary-based Ganz reported revenues of Rs 56.5 crore and an operating loss of Rs 3.3 crore.

Going forward, Crompton Greaves is expected to continue leveraging strong growth across its business segments. It has an order book of Rs 5,170 crore at the end of the last quarter, up nearly 20 per cent y-o-y. At Rs 304, the stock trades at 24 times estimated FY08 earnings, given the growth potential in the sector.

Punjab Chemicals: Eyeing buys

Like its larger competitor United Phosphorus, which has followed an acquisition strategy to gain markets globally, Punjab Chemicals too is following a similar model. Its purchase of Netherlands-based Pegevo for ¤ 39.5 million is its largest, and follows its earlier acquisitions of SD AgChem, Belgium and Sintesis, Argentina.

At an enterprise value of 39.5 million euros, Punjab Chemicals will pay about 1.8 times CY06 revenues for Pegevo, and 15 times operating profit.

While this amount appears on the higher side, the Punjab Chemicals management highlighted that Pegevo has product registrations in the Netherlands as well as the EU, which the company can leverage.

These government permissions would have otherwise taken the company five years. Punjab Chemicals can use Pegevo's team to apply for more product registrations as well its R&D facilities.

Pegevo's formulations plant has large enough capacity to produce herbicides, insecticides and fungicides. Punjab Chemicals has received board approval to raise capital in India or abroad to the tune of Rs 400 crore, a part of which will be used to fund the current acquisition.

The company had faced pressure on profitability due to lower realisations, an increase in raw material costs and the appreciating rupee.

In the June 2007 quarter too, its operating margins improved marginally to 7 per cent. Top line growth was good at 25 per cent, but higher interest, depreciation and tax kept net profit flat.

The stock trades at almost 13 times trailing earnings, and now the stock upside depends on how quickly it can get returns in international markets.

PVR: Blockbuster

Driven by an increase in the number of seats as also a rise in the price of tickets, PVR's sales for the June quarter have seen a smart rise of 35 per cent y-o-y to Rs 54.6 crore. The number of seats was higher by 43 per cent while the average price of tickets was Rs 122.

With the company receiving the tax exemption for its Juhu multiplex in Mumbai for five years, it paid out a lower entertainment tax as a percentage of gross box office collections.

This together with better operating efficiencies, pushed up the operating profit margin by 530 basis points y-o-y to 21.7 per cent.

The average spend per head was maintained at Rs 31 during the quarter despite the multiplex earning lower spends at some of the newer properties, mainly thanks to the increases in the food and beverage prices. PVR now operates a total of 82 screens and plans to take this up to 157 by FY09.

While it plans to have a pan-India presence, it will focus on the northern part of the country as that will give it greater bargaining power with distributors for film rights. Towards the end of FY08, PVR will be releasing the two films that it has signed with Aamir Khan Productions.

PVR has reportedly invested Rs 20 crore in the films through its subsidiary PVR Pictures. PVR's net profit in FY07 was Rs 10.2 crore. At Rs 201, the stock is still 20 per cent off its recent high of Rs 240 and trades at a multiple of just under 23 times FY08.

With contributions from Amriteshwar Mathur and Shobhana Subramanian