ALTHOUGH Jain Irrigation System’s (JISL) operational performance for the June 2010 quarter appears strong, weaker consolidated numbers for FY10 mean the scrip is trading at unsustainably high levels. The company, which doesn’t publish consolidated numbers every quarter, revealed a lower consolidated net profit compared to the stand-alone, indicating its subsidiaries had made a loss during FY10 in spite of a net profit in FY09.
For the year ended March 2010, the company reported a net profit of 271 crore on a stand-alone basis, while reporting 248 crore of consolidated profit as subsidiaries made loss of Rs 23 crore. The subsidiaries contribute nearly one-fifth to the company’s consolidated net sales. The company’s current market valuation stands high at 10,055 crore, which translates into a price-to-earnings multiple of 40.5 based on the fullyear numbers.
During the June 2010 quarter, it was mainly the forex losses of 20 crore and a 36% jump in depreciation that played a spoilsport on an otherwise operationally strong stand-alone performance. JISL had booked 21 crore of forex gains in the year-ago period. The company improved its operating margins and registered a 31% growth in operating
profits. However, the pre-tax and post-tax profits were down marginally against the year-ago period.
JISL’s largest business segment of agri-input products enjoyed a healthy jump in net sales as well as profits during the June quarter, while the industrial products suffered a significant margin erosion. This business, which contributed one-fourth of JIL’s stand-alone revenues, reported a 3% fall in the pre-interest-andtax profits.
The company continues with its strong volume growth in the micro-irrigation and PVC pipes segment with healthy operating margins. It has announced a dividend of 4.5 per share and proposed to split shares in 1:5 proportion. However, its valuations appear to have run ahead of its fundamentals with the price-toearnings ratio above 40 — a level it had not crossed even at the height of market euphoria in the month of January 2008. Long-term investors should wait for the scrip to cool off before investing.
For the year ended March 2010, the company reported a net profit of 271 crore on a stand-alone basis, while reporting 248 crore of consolidated profit as subsidiaries made loss of Rs 23 crore. The subsidiaries contribute nearly one-fifth to the company’s consolidated net sales. The company’s current market valuation stands high at 10,055 crore, which translates into a price-to-earnings multiple of 40.5 based on the fullyear numbers.
During the June 2010 quarter, it was mainly the forex losses of 20 crore and a 36% jump in depreciation that played a spoilsport on an otherwise operationally strong stand-alone performance. JISL had booked 21 crore of forex gains in the year-ago period. The company improved its operating margins and registered a 31% growth in operating
profits. However, the pre-tax and post-tax profits were down marginally against the year-ago period.
JISL’s largest business segment of agri-input products enjoyed a healthy jump in net sales as well as profits during the June quarter, while the industrial products suffered a significant margin erosion. This business, which contributed one-fourth of JIL’s stand-alone revenues, reported a 3% fall in the pre-interest-andtax profits.
The company continues with its strong volume growth in the micro-irrigation and PVC pipes segment with healthy operating margins. It has announced a dividend of 4.5 per share and proposed to split shares in 1:5 proportion. However, its valuations appear to have run ahead of its fundamentals with the price-toearnings ratio above 40 — a level it had not crossed even at the height of market euphoria in the month of January 2008. Long-term investors should wait for the scrip to cool off before investing.
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