Stock Market Flash on Page Industries for 4QFY2011

Stock Market Flash on Page Industries for 4QFY2011 with an Accumulate recommendation and a Target Price of `1898 (12 months).

Page Industries – 4QFY2011 and FY2011 financial result highlights  

·         For 4QFY2011, net sales increased by 34.7% yoy and declined by 16.9% qoq to `111cr and was inline with our estimates.

·         The company ended FY2011 with a 44.8% yoy increase in net sales to `492cr vs. our expectation of `493cr.

·         EBITDA increased by 14.0% yoy in 4QFY2011 to `17.1cr but witnessed a decline of 38.3% qoq on the back of lower revenue generated on a qoq basis. The margin took a hit of 280bp yoy and 532bp qoq to 15.4% because of increased other expenses and staff cost.

·         For FY2011, EBITDA increased by 45.6% yoy to `401cr but margin dipped by 42bp at 18.5%.

·         4QFY2011 witnessed a 17.6% yoy decrease in PAT to `12.9cr on the back of margin compression during the quarter. However, PAT margin only declined by 10bp yoy to 11.6% due to lower tax provisions during the quarter, which stood at 17.5% of PBT.

·         FY2011 witnessed a strong increase in PAT by 47.8% yoy to `59cr on the back of higher revenue. Though OPM contracted during the year, PAT margin increased by 24bp to 11.9% due to higher other income, which increased by 89% to `12cr.

·         Outlook and valuation: Considering the immense potential of India’s consumption story, the company’s predominant presence in a fast-growing market, strong brand recall and consistent financial performance, we remain positive on the stock and. We continue to maintain our Accumulate rating on the stock with a target price of `1,898, valuing it at 24x FY2013 earnings. We may revise our numbers post interaction with the management.

4Q And FY2011 Performance Highlights

Y/E March (Rs cr)	4QFY11	3QFY11	% chg (qoq)	4QFY10	% chg (yoy)	FY2011	FY2010	% chg
Net Sales	111.4	134.1	(16.9)	82.7	34.7	491.6	339.4	44.8
Consumption of RM	51.6	64.7	(20.3)	38.9	32.7	240.9	163.4	47.5
(% of Sales)	46.3	48.3	(196.3)bp	47.0	(70.5) bp	49.0	48.1	86.7 bp
Staff Costs	23.9	23.8	0.5	16.5	44.4	89.7	58.1	54.3
(% of Sales)	21.4	17.7	370.8 bp	20.0	144.2 bp	18.2	17.1	112.3 bp
Other Expenses	18.8	17.8	5.4	12.2	53.5	70.3	53.8	30.5
(% of Sales)	16.8	13.3	357.2 bp	14.8	205.9 bp	14.3	15.9	(156.9) bp
Total Expenditure	94.2	106.3	(11.3)	67.6	39.3	400.8	275.3	45.6
Operating Profit	17.1	27.8	(38.3)	15.0	14.0	90.7	64.1	41.6
OPM	15.4	20.7	(531.7) bp	18.2	(279.6) bp	18.5	18.9	(42.1) bp
Interest	2.2	1.0	109.1	1.0	114.5	5.2	3.0	75.7
Depreciation	2.8	2.5	13.3	2.5	13.1	9.8	9.0	9.4
Other Income	3.5	2.5	38.5	2.7	29.1	12.1	6.4	89.0
PBT (excl. Extr. Items)	15.6	26.7	(41.6)	14.2	9.9	87.8	58.5	50.0
Extr. Income/(Expense)	-	-		-		-	-
PBT (incl. Extr. Items)	15.6	26.7	(41.6)	14.2	9.9	87.8	58.5	50.0
(% of Sales)	14.0	19.9	(592.8) bp	17.2	(316.9) bp	17.9	17.2	61.6 bp
Provision for Taxation	2.7	11.1	(75.4)	4.3	(36.0)	29.2	18.9	54.6
(% of PBT)	17.5	41.6	(2,402.5) bp	30.1	(1,257.3) bp	33.3	32.3	99.3 bp
Reported PAT	12.9	15.6	(17.6)	9.9	29.6	58.5	39.6	47.8
PATM	11.6	11.7	(9.7) bp	12.0	(45.2) bp	11.9	11.7	23.9 bp
Equity shares (cr)	1.1	1.1		1.1		1.1	1.1
EPS (Rs)	11.5	14.0	(17.6)	8.9	29.6	52.5	35.5	47.8

Actual Vs Estimate FY2011

Particulars (Rs cr) Actual Estimated Variance (%) FY2011 Sales (Rs cr) 491.6 493.3 (0.4) EBITDA (Rs cr) 90.7 91.8 (1.1) OPM (%) 18.5 18.6 (14.0)bp PAT (Rs cr) 58.5 54.1 8.2

Source: Company, Angel Research

Fundamental analysis to judge the stock market

The impact of fundamental analysis is dramatic when it comes to business analysis. Although, the name suggests it is a way of looking towards a business from the basic financial point of view. However, it is just the beginning of the elaborate financial analysis. The necessity of fundamental goes beyond business and reaches the stock market as well.

Investors, be an institutional or an individual, make uses of the tools of fundamental analysis to judge the movement of stock market. While an investor put his money in stocks he feels the necessity to analyze how the financial market values that particular stock. And conducting this analysis requires fundamental analysis and its tools.

I have attempted to explain some of the handy methods of fundamental analysis in this article for stock analysis. An investor may not wish to indulge in the complicated calculations of in-depth analysis of stock. Such investors can also find the explained tools of fundamental analysis of great help for analyzing stock market trends. 

Buying a stock is equivalent to purchasing a part of a company and thus you need to keep an eye on the earnings. Since earnings are practically profit of a company, it gives an investor a yardstick to gauge the stock performance. Stock market hammers a stock when the underlying company’s earnings fall and the converse is also true. A company typically, issues reports on earnings in every quarter; four times annually. Several ratios can be computed out of the earnings of a company to gauge the performance of its stock.

Some of the crucial ratios computed by company earnings are as follows:

Earnings per Ratio or EPS is the ratio of Net Earnings and Outstanding shares of a company. Comparison among EPS of different companies is helpful to select the best company among a set. This ratio doesn’t involve complicated calculations and can be done easily by an investor.

Price Earnings Ratio is yet another instrumental figure that describes the performance of a particular stock. A high Price Earnings ratio implies that stock market has high hopes from the specific stock and thus it is overvalued. On the contrary, low Price Earnings ratio indicates less confidence of stock market on that respective stock.  Price Earnings Ratio is calculated by dividing Stock Price by EPS.

Finally, I will end my article with another example of earnings metrics. Return on equity (ROE) is a significant calculation that gives the result in percentage. Typically 13 % to 15 % is the range within which a healthy company lies. 

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