Not a great start to September quarter results   

October 13, 2010

Though net profits have jumped, operating profit growth for the first few companies that have declared results has been a mixed bag

Investors are eagerly awaiting the September quarter performance figures for corporate India, even as the Sensex has run up by 12% in the month of September alone, in anticipation of good corporate results. Analysts are hoping that the Sensex companies will report a 23% rise in profit. Even though the June quarter performance was far from impressive, valuations soared across various sectors of the economy. To justify the high price tag given by the market, India Inc will have to come up with a solid set of numbers for the latest quarter.

Several major companies have already come out with their financials. So far, the results have been alright, but nothing to gloat about. Sintex Industries reported a top-line growth of 20% and a growth in operating profit margin of 19% over the corresponding quarter last year. Growth came mainly from its building materials and custom moulding segments. Net profit growth was 30%. The Sintex stock is trading at Rs422 at a P/E of 19.7.

Castrol India also put in a sturdy performance in Q2FY2011. Revenues were up by 13% while the operating profit margin jumped 18% over the previous corresponding quarter. Margins took a slight hit due to higher raw material prices. Net profit grew by 22% and the P/E is 26.5. The stock trades at Rs498. Kajaria Ceramics, which manufactures floor and wall tiles, reported a revenue jump of 20% and operating profit margin was up 15% over the corresponding quarter last year. Net profit growth was a stunning 52% and the P/E is 11.1. The stock is trading at Rs82. With the sharp increase in cars sales, Exide Industries has performed well on the revenue front. However, operating profit growth has remained stagnant. The battery maker clocked strong revenue growth of 19% for the quarter, but its operating profit margin declined by 1%. Sales were helped by a 15% growth in volumes, although margins fell due to higher raw material costs. Exide was hurt by capacity constraints. Net profit growth was robust at 42% and the P/E is 17.18. The stock trades at Rs167.

A couple of companies that have disappointed investors are MphasiS and Rei Agro. MphasiS, the outsourcing services provider controlled by the giant US company EDS, registered a 6% drop in sales and just a 4% rise in its operating profit margin compared to the corresponding quarter last year. Rei Agro, the basmati processing and marketing company, turned in a 14% drop in revenues and a 1% increase in operating profit margin during the period.— Moneylife Digital Team