What has really helped this Bajaj company shore up its margins is the aggressive reduction in operating expenses. Despite a 11% (YoY) fall in net sales at Rs.518.81 crore, the company managed to show an over 11 times rise in net profit at Rs.16.31 crore. The operating expense of the company was reduced by 15% and this helped shore up the profit margins substantially. It managed to bring down costs on raw material, employee costs and power and fuel expenses, which helped the overall performance.
Reduction is excise duty during the stimulus package almost halved the excise duty collection of company from Rs.78.48 crore to Rs.40.92 crore and this in turn got down the gross sales. Lower realisation on steel products also reduced the overall sales.
The company has completed its Rs.350-crore expansion of capacity from 300,000 tonnes to 500,000 tonnes of high-quality speciality steel during Q2FY10 and by end of FY10, it would be able to stabilise the operations and start production at its full enhanced capacity. The full impact of this would be seen in the performance of FY11.
Reduction in raw material prices would have been easier in Q2 but now it would be difficult. The company has already started witnessing a surge in its raw material prices and has, in tandem, increased the prices of its specialty steel by 5-7% in October.
The company currently has a debt of around Rs.1500 crore and over the next 12 months, it plans to bring it down through sale of its surplus land, around 60-100 acres at its plant in Kalwa, Thane, which is estimated to fetch around Rs.700-800 crore. The company has a substantial land bank - 42 acres at Sinnar (Nashik), 40 acres at Lonand (Pune), 210 acres in the Thane-Belapur area and around 250 acres at Giningera in Karnataka.
The stock price has soared yesterday and then settled at Rs.49 as against its 52-week high of Rs.69.10. Stay invested or for long term, one can buy on dips.
Source: Internet (www.premiuminvestments.in by S P Tulsian)
Reduction is excise duty during the stimulus package almost halved the excise duty collection of company from Rs.78.48 crore to Rs.40.92 crore and this in turn got down the gross sales. Lower realisation on steel products also reduced the overall sales.
The company has completed its Rs.350-crore expansion of capacity from 300,000 tonnes to 500,000 tonnes of high-quality speciality steel during Q2FY10 and by end of FY10, it would be able to stabilise the operations and start production at its full enhanced capacity. The full impact of this would be seen in the performance of FY11.
Reduction in raw material prices would have been easier in Q2 but now it would be difficult. The company has already started witnessing a surge in its raw material prices and has, in tandem, increased the prices of its specialty steel by 5-7% in October.
The company currently has a debt of around Rs.1500 crore and over the next 12 months, it plans to bring it down through sale of its surplus land, around 60-100 acres at its plant in Kalwa, Thane, which is estimated to fetch around Rs.700-800 crore. The company has a substantial land bank - 42 acres at Sinnar (Nashik), 40 acres at Lonand (Pune), 210 acres in the Thane-Belapur area and around 250 acres at Giningera in Karnataka.
The stock price has soared yesterday and then settled at Rs.49 as against its 52-week high of Rs.69.10. Stay invested or for long term, one can buy on dips.
Source: Internet (www.premiuminvestments.in by S P Tulsian)
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