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Greaves Cotton

Capital Market/ 11:33 , Feb 08, 2014

Net up 10% thanks to tax write-back

Greaves Cotton, one of indiafs leading independent engine manufacturing company for applications ranging from 3-wheelers, gensets, construction equipment etc has registered 18% fall in sales to Rs 423.40 crore for the quarter ended Dec 2013. Lower sales together with 270 bps contraction in operating margin resulted in 34% fall in operating profit to Rs 47.35 crore. After accounting for lower other income, higher interest and depreciation cost the PBT was lower by 39% to Rs 42.08 crore. As EO expenses stand lower by 91% (to Rs 1.34 crore), the de-growth at PBT after EO moderated to 25% to Rs 40.74 crore. However the PAT was higher by 26% to Rs 43.29 crore as the taxation being a write back of Rs 2.55 crore compared to a provision of Rs 19.93 crore in corresponding previous period. Eventually the net profit was higher by 10% to Rs 37.75 crore hurt by higher prior period tax of Rs 5.54 crore for the quarter compared to nil in the corresponding previous period.

  • Downside in revenue is largely on account of subdued sales for both engines and infra equipments. The segment revenue of engines was lower by 16% (to Rs 394.16 crore or 93% of sales) on the back of fall in engines volumes especially the auto engines, which is the main stay of the company. The segment revenue of infrastructure equipment was lower by 45% (to Rs 23.84 crore or 6% of sales). But the segment sales of others were higher by 59% to Rs 5.09 crore.
  • Operating profit margin contracted by 270 bps to 11.2% squeezed by under recovery as well as Rs 2 crore of non recurring expenses which was part of other expenses for Q3FY14. Material cost as % to sales was lower by 200 bps to 66.6%. However as other cost heads stand increase the OPM contracted significantly for the quarter. Cost of traded goods was higher by 20 bps to 2%, the staff cost was higher by 220 bps to 10.6% and the other expenses was higher by 220 bps to 10.6%.
  • Segment profit of engines was lower by 21% to Rs 63.20 crore hurt by lower sales as well as 110 bps contraction in segment margin. On the other hand the infrastructure equipment business registered a loss of Rs 6.48 crore compared to a loss of Rs 1.14 crore in the corresponding previous period. Similarly the others have also registered a segment loss of Rs 0.02 crore compared to a profit of Rs 0.30 crore in the corresponding previous period.

YTD performance

Sales were lower by 7% to Rs 1283.73 crore. But with 150 bps contraction in OPM, the operating profit was lower by 18% to Rs 147.26 crore. But the de-growth at PBT (before EO) was 19% to Rs 132.02 crore as higher other income negate the impact of higher interest and depreciation cost to large extent. EO expenses for the period stood higher at Rs 41.39 crore, a rise of 135%. EO expenses for the quarter comprises diminution in value of investment of Rs 38.66 crore and VRS compensation of Rs 2.73 crore and for the corresponding previous period diminution in value of investment of Rs 14.13 crore and VRS compensation of RS 3.43 crore in corresponding previous period. Thus hit the PBT (after EO) stood lower by 37% to Rs 90.63 crore. Taxation was lower by 49% to Rs 23.56 crore and thus the PAT was lower by 32% to Rs 67.07 crore. Eventually the net profit was lower by 38% to Rs 61.53 crore as the prior period tax is a provision of Rs 5.54 crore compared to a write back of Rs 1.07 crore in corresponding previous period.

Management comment

Sunil Pahilajani, MD & CEO, said, Though our sales have been affected by the overall dismal business environment, we have been constantly focusing on our product]market growth strategy. In line with this strategy, we have been working on technological improvements and value additions in our current product portfolio and have recently opened a Technology Centre for the Farm Equipment Business at Gummudipoondi, Chennai. The company has stepped up its investment in Research & Development activities to develop new products. Understanding customer needs, the construction business launched the 37 metre Boom Pump to plug in the product gap and refurbish the product portfolio along with the newly introduced concrete S valves. International business has also been able to widen its global footprint in South East Asia, East Africa and Middle East markets and has set up a distribution and aftermarket network to service customers in these regions. Coupled with these, we have been driving initiatives which are focused on cost optimization and human resource competency development. We believe in the long run, people and products will help us deliver quality and excellence thereby enhancing customer experience.

The stock hovers around Rs 61.05.

Greaves Cotton: Results


1312 (3)1212 (3)Var. (%)1312 (9)1212 (9)Var. (%)1303 (12)1203 (12)Var. (%)
OPM (%)11.213.911.513.012.913.5
Other inc.6.786.85-119.2211.836215.555.98160
PBT 42.0868.47-39132.02162.02-19217.76207.295
EO Income-1.34-14.18-91-41.39-17.61135-17.6143.29PL
PBT after EO40.7454.29-2590.63144.41-37200.15250.58-20
Current Tax 9.2518.00-4935.7543.00-1758.5061.49-5
Deferred Tax-11.801.93LP-12.193.01-5054.763.6032
PAT before EO (net of tax)43.2934.362667.0798.40-32136.89185.49-26
EO (net of tax)-5.540.00-5.541.07PL1.070.00
PAT after EO37.7534.361061.5399.47-38137.96185.49-26
EPS (Rs)*####6.16.3
* EPS is on current equity of Rs 48.84 crore, Face value of Rs 2
# EPS is not annualised due to seasonality of business
Figures in Rs crore
Source: Capitaline Corporate Database


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