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Saturday, June 05, 2010

Pitti Lamination's : March 2010: Quaterly and Annual Results review.

Pitti Lamination's is one of the recommended stocks for value investment. In the Dec 2009 Quarterly results review we had dissected the poor results with Net Profit -ve3.47Cr. The conclusion drawn was that Pitti Lamination's had improved its profit margins and the -ve results were due to one time exceptional expenses related to GE business (one of the largest clients of Pitti Lamination's) Link

Pitti Lamination's March 2010 annual results are out and we can now confirm that the margins have been sustained and the March 2010 Quarterly results were really good.

1. Expenditure as a percentage of sales has dropped from 90.44 % in year 2009 to 84.7% in Year 2010
2. Depreciation has increased as a percentage of sales.. One must remember that the sales for year ending March 2010 is 152.99Cr while March 2009 it was 267.02Cr .. due to this huge drop in sales certain numbers will look inflated.. (such as depreciation..)
3. Interest Payment has also been inflated by the drop in sales. The actual interest payment has reduced in March 2010 (10.64Cr) from March 2009 (10.93Cr) 
4. Profit Before tax for the full year is down to 0.60 percentage in March 2010 due to the large one time exceptional losses in Dec 2009 Quarter.
5. Last but the most important the Profit Before Interest & Tax. We can see that for the Quarter ending March 2010 and Dec 2009 the margins are 12.31% and 13.13% respectively which is way above the Annual March 2009 margin of 7.49%
This improvement in margin was disclosed in Dec 2009 Quarterly result update and March 2010 Quarterly results now confirm that the margins are being maintained..

Conclusion: Pitti is already on its way to recovery.. It has expanded its capacity and the value added products are improving its operating margins. Right now the one time exceptional expenses related to GE is distorting the excellent operating margin improvement.
March 2010 Quarterly results the top line has also recovered which was one of the remaining concerns.. 
This is a good time to accumulate Pitti.. Margin improvement will really improve the ROCE  and we can easily expect Pitti to hit triple digits within 12- 24 months time frame.

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