Small, midcaps under more pressure

Fri, 28 Jan 01:30 pm

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   09:30 am   

   11:30 am   

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Profit booking led the Indian markets to drop further into the red during the previous hour of trade. Currently, stocks from across the board are under pressure with those from the realty, consumer durables and auto sectors leading the pack of losers. IT and FMCG stocks are among the top performers at the moment.

The BSE-Sensex is down by about 300 points (down 1.6%) while NSE-Nifty is trading lower by about 100 points (down 1.7%). Stocks from the mid and small cap spaces are under more pressure as the BSE Midcap and BSE Small cap indices are both down by more than 3% each. The rupee is trading at 45.76 to the US dollar.

Engineering stocks are currently trading weak led by Blue Star, TRF, Voltas, Thermax and BHEL. Emco announced its results for the period ended December 2010 recently. The company’s standalone topline grew by 46% YoY during 3QFY11 the quarter. At the operating level, the company’s profits however dropped by 9% YoY as margins contracted by a sharp 4.8% YoY to 8%. However, good part is that during the quarter the company returned back to profitability after recording operating losses for the first two quarters of FY11. Emco’s net profit declined by 46% YoY during the quarter, led by a poor operating performance coupled with a 48% increase in interest costs.

During the nine month period ended December 2010, the company’s revenues increased by 18% YoY, while it recorded a loss of Rs 491 m during the period. As mentioned above, the poor performance during 1HFY11 was the reason behind the poor performance in 9mFY11. At the end of December 2010, the company had an orderbook of Rs 9.1 bn, which stands at about 0.8 times its trailing twelve month sales. This includes about 32% of transformer orders, 2% of meter orders, and another 66% from the projects business wherein the company executes turnkey substations.

Essel Propack announced its results for the quarter ended December 2010 recently. The company has reported a 19% YoY and 152% YoY growth in sales and profits respectively. Consolidated operating (EBITDA) margins improved by 0.2% to 16.5% on the back of lower staff costs and lower other expenditure (both as a percentage of sales). Operating margin could have been higher but for increase in costs of goods as a percentage of sales. For 9mFY11, on consolidated basis, net profit fell by 33.1% YoY while net profit margins fell by 1.9% to 3.5%. However, when adjusted for extraordinary gain, net profit grew by 50% YoY while net profit margins grew by 0.9%.