One glance at the financial performance for first quarter ended 30th June 2008, be it YoY or QoQ, indicates an across the board fall in topline as well as bottomlines. Sequentially, OPM has slipped from 19.05% in Q4FY08 to 17.08% in current Q1, NPM slipped from 6.99% to 4.85%. YoY, the fall is sharper. OPM has come down from 27.43% and NPM from a very healthy 13.14%.
There were two reasons for this fall. The biggest culprit is the fact that the company has shut down the plant for 21 days for debottlenecking of capacities & catalyst change. 21 days is almost like a full month, juts one week short. So of the three months in Q1, the company actually operated for just 2 months and one week. Naturally, the profitability was bound to take a hit.
Secondly, even on the lower net sales, the company’s operating expenses was quite high. YoY, one may feel that the company has managed to keep it at the same levels of Rs.215 crore but when compares it as percentage of sales, it becomes apparent that the outgo was much higher. In Q1FY09, operating expenses ate away 86% of the net sales, which was at 79% in Q1FY08.
The current fiscal is expected to be good. Its carbon-di-oxide plant of 80 ton per day capacity at Kashipur started commercial production in April’08 and this would also start contributing to the bottomlines in the current fiscal.
India Glycols is a very good company, its product is its winner. It manufactures MEG from molasses unlike others who do it from crude, hence it is protected from the vagaries of the rising crude prices and at the same time, gives a more cost effective substitute for its customers. Its located in Uttaranchal, which is close to the main sugar belt of India. And that is the reason why the company did not hit rock bottom despite the performance.
Currently quoted at Rs.210, its best to accumulate this stock at every dip and keep a 15-18 months perspective for gains.