Maruti: Swift drive

Better product mix has yielded higher average realisation of 7.4 per cent in the June quarter.

Higher interest rates do not appear to have dented Maruti's car sales. With its newly introduced SX4 and the Swift, which was launched late last year, both a hit with customers, the Gurgaon-based carmaker has seen volumes for cars and multi-utility vehicles in the domestic market increase by a robust 18.3 per cent y-o-y in July. With this, the volume increase for the first four months of the fiscal has been a good 17.4 per cent y-o-y.

The strong demand has translated into a near 26 per cent top line growth for the June quarter to Rs 3931 crore. The better product mix has given Maruti higher average realisations of 7.4 per cent; the car maker has been able to command good prices for its SX4 and Swift models.

This together with savings in the import of raw materials because of the appreciation of the rupee, resulted in better profitability; the operating margin was up 240 basis points sequentially at 14.6 per cent, though it was flat y-o-y.

Lower other expenses-down 160 basis points q-o-q""resulting from better capacity utilisation and productivity at the company's new plant, also helped push up the margin. The operating profit rose a smart 26 per cent to Rs 575 crore.

While sales have been strong in the first quarter, they could slow down somewhat if interest rates continue to remain high and the company is not able to command the kind of prices that it has been getting.

At the current price of Rs 791, the stock trades at 13 times estimated FY08 earnings and 11.5 times FY09 earnings and can be accumulated.

Concor: Slack throughput

Container Corporation reported a lacklustre performance in the June 2007 quarter due to lower-than-expected exim throughput growth and that's despite discounts offered on tariffs.

As a result, operating profit grew merely 6.4 per cent y-o-y to Rs 228 crore in the last quarter, while its income from operations rose 7.8 per cent to Rs 776 crore.

Exim business accounted for nearly 79 per cent of its net sales in Q1 FY08. Its overall operating profit margin also declined 40 basis points y-o-y to 29.4 per cent in Q1 FY08.

Concor's exim throughput grew 9 per cent y-o-y in Q1 FY08, which is lower than the 10 per cent growth recorded in FY07. Analysts highlight that while volumes at JNPT improved last quarter due to commissioning of the third terminal, the company lost market share to road haulage companies that cater to the hinterland.

As a result, segment profit margin of the exim division fell 95 basis points y-o-y to 29.4 per cent in Q1 FY08.A small cushion for margins was provided by strong growth in the domestic segment in the last quarter, thanks to the introduction of high-speed wagons and end-to-end solutions for key clients.

As a result, Concor's domestic throughput expanded 23 per cent y-o-y in the last quarter. Segment profit margin of the domestic division expanded 270 basis points y-o-y to 19.7 per cent in the June 2007 quarter.

Going forward, expectations of strong growth in domestic throughput, coupled with a stable cost structure are expected to help operating margins. At Rs 2040, the stock is reasonably priced at 16 times estimated FY08 earnings.

Balrampur Chini: Weak realisation

Lower sugar realisations put pressure on Balrampur Chini's financials in the June 2007 quarter. Since sugar realisations reduced 28 per cent y-o-y to Rs 13.41 per kilo, net sales declined 7.1 per cent to Rs 365 crore.

On the cost side, prices of cane sugar remained high in Uttar Pradesh and recoveries were lower by 132 basis points y-o-y, which pushed the company to an operating loss of Rs 16.8 crore in the June quarter compared with an operating profit of Rs 106.3 crore a year earlier.

If it weren't for the segment profit in both its distillery and cogeneration more than doubling, Balrampur's losses would have been much higher.

At the profit before interest and tax level, sugar made a loss of Rs 74.4 crore, while distillery and cogen made profits of Rs 16 crore and Rs 27.4 crore respectively. Even segment profitability in distillery (up 800 basis points y-o-y) and cogen (up 600 basis points y-o-y) were impressive.

Like other sugar companies, Balrampur too has increased capacity across its segments, which has increased its interest and depreciation burden. Thus, the pre-tax loss was nearly Rs 56 crore against a net profit of Rs 65.4 crore a year earlier.

The outlook for sugar remains weak this year-there is a glut in global markets and domestic production is going to be nearly 50 per cent higher this year over last year, and leave a surplus of around 8 million tonne.

There are uncertainties about the UP sugar policy, which is yet to be announced. Balrampur's sugar realisation has declined to Rs 13, and the rupee appreciation is not going to help exports either. Higher production of ethanol and power will help in reducing sugar losses. The stock is likely to underperform until the cycle improves.

With contributions from Shobhana Subramanian and Amriteshwar Mathur