speed of results disclosure: a sign of....

How nifty is your company in disclosing its quarterly results: http://www.mydigitalfc.com/companies/speed-results-tells-corporate-governance-701

high gross margins not sustainable: asian paints

My analysis of Asian Paints Q3, FY16, results:

Asian Paints painted a rosy picture in its latest quarter financials by reporting the strongest yearly sales growth in the last five quarters. On Monday, the paints company, which is a constituent in the Nifty 50 index, announced its third quarter (December 2015 quarter) results for the current financial year 2015-16 (FY16).

In the third quarter, Asian Paints’ consolidated operating income shot up by 13.9 per cent to Rs 4,160 crore compared to the year-ago quarter. In the previous two quarters of FY16, the company had seen muted year-on-year growth rates of 7.8 per cent (first quarter) and 4.0 per cent (second quarter).

The last time when the operating income had seen double-digit YoY growth was in the second quarter of FY15 when it was 16.6 per cent.

The December 2015 quarter the Diwali season effect on the company’s sales was present while it was not present in the year-ago quarter. Combining the September and December quarters of FY16, the consolidated operating income growth rate, over the aggregate of the two year-ago quarters, was 9.0 per cent. This growth rate was lower than the corresponding 2-quarter aggregate growth rate in FY15 when it was 10.9 per cent, and previous years growth rates when it was 15.6 per cent (FY14) and 17.8 per cent (FY13).

The adjusted profit after tax, as per Capitaline database, of Asian Paints, shot up by 35.4 per cent to Rs 499 crore in the third quarter, on a YoY basis. This was the highest yearly growth rate seen in any quarter in the last nine quarters. It was in the second quarter of FY14, when Asian Paints had seen a yearly growth rate of 36.7 per cent.

Our analysis suggests that the company appeared to have heavily used its strong brand image to its advantage by not acceding much ground on the pricing front inspite of sharp fall in raw material costs. This meant the sales value growth kept a decent pace with the growth in its volume sales.

This was reflected in the continuing sharp growth in the company’s gross margins over the last several quarters. In the latest quarter, the consolidated gross margin (ratio of operating income minus cost of raw materials consumer to operating income) stood at 54.1 per cent, which was possibly at a record high or at least the highest in the last 19 quarters at the very minimum. In the year-ago quarter of December 2014, the gross margin stood at 49.1 per cent.

In a conference call with analysts on Monday evening, the company management was, however, categorical that the high level of gross margins was clearly not sustainable going forward. The company management claimed that there was no change in the pricing of its products. It pointed out that the newly acquired Ethiopian business had shown strong gross margins in the last one year, and domestic joint ventures had also seen strong margins expansion.

Hdg: Asian Paints Q3 results
Intro: Sales growth in double digits for first time in FY16 in Q3
	Oct-Dec 2015 (Rs crore)	YoY (%)	Apr-Dec 2015 (Rs crore)	YoY (%)
Operating income	4169	10.3	11562	8.6
EBIDTA#	728	32.4	1892	28.1
EBIDTA margin (%)	17.5	20.0	16.4	18.0
Adj. Profit after Tax	463	16.0	1318	25.0
APATM* (%)	11.1	5.2	11.4	15.2
Figures represent consolidated financials
#Profit before interest, depreciation, taxation and ammortisation
* adjusted PAT margin
Source: Company filings, Capitaline. Analysed by FC Research Bureau

Analysts, however, maintain that very high gross margins would tempt more international competition to enter the domestic paints market, and could hurt Asian Paints growth prospects in the future if that happens.

In the conference call with analysts, the company management did not disclose the exact impact of the approximately 30 per cent fall in the crude oil prices in the December 2015 quarter on its raw material costs. It only said that the company imports crude derivatives and not crude oil per se, and that the crude derivatives prices are determined by global demand-supply conditions in crude derivatives and not just by the level of crude price.

The company management disclosed that in its domestic retail segment, it was seeing considerably higher growth in smaller towns than the big cities. It said that while the southern India heavy rains in November and December affected their southern region business, it did not have a major impact on its all-India sales growth. 


http://www.mydigitalfc.com/companies/asian-paints-reports-strongest-sales-numbers-five-quarters-781

infosys' profit margins continue to slide

An analysis I did on Infosys' long-term trend in profitability in today's edition of FC (http://www.mydigitalfc.com/companies/profit-margins-sliding-q3-622)

Infosys results: profit margins continue to slide down 

Infosys may have beat the market expectations by a decent margin when it announced its December 2015 quarter results, but a long-term analysis of the sequential dollar revenue growth in the last nine quarters reveals that it was far from being its best performance.

Our long-term analysis, based on Bloomberg data of Infosys’ consolidated financials in dollar terms, showed that the dollar revenues of Infoys in the latest quarter (third of financial year 2015-16) grew by just 0.2 per cent to $2,410 million in Q3 FY16 as compared to the previous quarter (Q2 FY16).

This is only the seventh best sequential dollar revenue growth which Infosys has recorded in the last nine quarters from Q3 FY14 to Q3 FY16. It was better compared to only Q4 FY14 and Q4 FY15 when the information technology major posted negative growth rates (see chart).

Infosys: long-term quarterly growth in dollar revenues
	Sales ($ million)	QoQ % change
Q3 FY14	2,101	0.5
Q4 FY14	2,085	-0.8
Q1 FY15	2,136	2.5
Q2 FY15	2,202	3.1
Q3 FY15	2,226	1.1
Q4 FY15	2,155	-3.2
Q1 FY16	2,263	5.0
Q2 FY16	2,407	6.4
Q3 FY16	2,413	0.2
Source: Bloomberg. Analysed by FCRB.

As per the financial statements disclosed by Infosys on Thursday, the sequential growth in consolidatated reported dollar revenues in Q3 FY16 was 0.6 per cent. The disclosed  statement covered the last five quarters and the 0.6 per cent growth rate in the latest quarter was the second lowest.

Research analysts at B&K Securities, in a flash research note on Infosys on Thursday after the latest quarter results were announced, said Infosys’ Q3 FY16 “revenue growth stood better than our and street expectations but growth was led by India revenues which always remain volatile. Growth from US as well as IMS was muted.”

The consolidated operating profit margin (ratio of profit before interest, depreciation and tax) in Q3 FY16 was 24.9 per cent with the operating profit being Rs 3,959 crore against revenues of Rs 15,902 crore. This 24.9 per cent operating profit margin (OPM) was the lowest in the last nine quarters, data from the Capitaline database showed in our analysis.

The highest OPM was in Q3 FY15 when it was 32.8 per cent. So, from the December 2014 quarter to the December 2015 quarter, Infosys’ OPM went from the highest to the lowest, as far as the period of the last nine quarters is concerned. In Q2 FY16 the OPM was 30.6 per cent.

Thus, sequentially, the margin fell by around 60 basis points. A post results research update by HDFC Securities on Infosys said “EBIT margin decline of 64 bps (basis points) QoQ (quarter on quarter) (was) in line on lower utilisation and pricing pressure.”

On the profit after tax margin (PATM) front, however, Infosys fared better. The PATM in the latest quarter of Q3 FY16 was 21.8 per cent, marginally higher than the previous two quarters but lower than the year-ago quarter when it was 23.6 per cent. The latest quarter PATM was the third lowest in the last nine quarters, as per data from Capitaline.

The profitability ratio fall was not unique to Infosys, as the IT industry has been under pricing pressure in the past couple of years. Tata Consultancy Services, the other IT major bigger in revenue size than Infosys, had announced its Q3 results on Tuesday which revealed a OPM of 30.7 per cent which was the second lowest in the last nine quarters. TCS’ PATM stood at 22.3 per cent, the third lowest in the last nine quarters.

one of the signs of good/bad corporate governance

As the new quarterly results season kicks off:


Analysis of board meeting dates, announced so far, to declare quarterly results for 3QFY16: https://t.co/uFhczfMNHc pic.twitter.com/wI2YAGIHFy

— Rajesh Gajra (@JournalistRGaj) January 4, 2016

The early birds
Fastest among Nifty 100 companies to announce their quarterly results dates
	Board meeting date
Federal Bank	12-Jan-16
Infosys	14-Jan-16
Asian Paints	18-Jan-16
Axis Bank	20-Jan-16
Mahindra & Mahindra Fin. Serv.	21-Jan-16
HDFC Bank	25-Jan-16
Colgate Palmolive (India)	27-Jan-16
Housing Devp. Fin. Corp.	27-Jan-16
United Spirits	27-Jan-16
Dabur India	28-Jan-16
Bajaj Finserv	03-Feb-16
Bajaj Auto	04-Feb-16
Bajaj Holdings & Investment	04-Feb-16
Tata Steel	04-Feb-16
Source: NSE. Analysed by FC Research Bureau

something is better than nothing!

Last digit vehicle no. #oddeven formula in Delhi from Jan 1-15 will make commuting relatively better on alternate days. Way to go, Delhi!

— Rajesh Gajra (@rgajra) January 2, 2016

make 2016 a year of transparency for investors in the stock market

In today's edition:

Make 2016 a year of transparency for investors:  https://t.co/OLS7glL96O pic.twitter.com/pZxgDd9Ys1

— Rajesh Gajra (@JournalistRGaj) January 1, 2016

how the stock market can change the fortunes of sectors in just one year!

Wrote this in the newspaper, I work for currently, a couple of days back:

In yesterday's edition:    https://t.co/XJsCbXrKjq pic.twitter.com/ck8qPjndmD

— Rajesh Gajra (@JournalistRGaj) January 1, 2016

Recent trends in Indian equity futures and options market

https://twitter.com/JournalistRGaj/status/681725266054385664?s=09

us fda warning letter to sun pharma

Late last week's development covered in my story on Monday this week. 

Latest case of US FDA action affecting an Indian pharma co.  https://t.co/kVEPsESGdE pic.twitter.com/4VrvBJPnJC

— Rajesh Gajra (@JournalistRGaj) December 21, 2015

5th & 6th wireless telecom operator in india may merge

 
Earlier this week, I wrote this:

Reliance Communications and Aircel may merge their wireless biz. https://t.co/YaV0HrMNSI pic.twitter.com/FxJEUsCSFY

— Rajesh Gajra (@JournalistRGaj) December 23, 2015