Recommendation: Buy
Price target: Rs 113
Current market price: Rs 88
Meeting expectations: Result highlights
- The net revenues of MRO-TEK grew by 1.3% quarter on quarter (qoq) and by 39.6% year on year (yoy) to Rs36.8 crore in Q3FY2006. The healthy quarterly revenue run rate of over Rs35 crore is much higher than the average of below Rs30 crore reported in the last fiscal.
- The operating profit margin (OPM) was flat at 17.8% on an annual comparison basis but declined by 90 basis points as compared with that in the previous quarter. The sequential decline was largely due to a 15.2% jump in the selling, general & admin (SG&A) expenses.
- On an annual comparison, the 19.3% growth in the profit before tax (PBT) was relatively lower than the revenue growth due to an increase in the interest outgo and depreciation charges during the quarter.
- The net profit, before the extraordinary items and prior year adjustments, stood at Rs4.55 crore, in line with our estimates. However, prior adjustments of Rs0.29 crore boosted the earnings to Rs4.8 crore. On an annual basis, the figures are not comparable due to the one-time write-off of Rs6.5 crore taken in the third quarter of the previous year. The company had reported a net loss of Rs0.8 crore in Q3FY2005.
- The company announced its maiden interim dividend of 25% (or Rs1.25 per share) during the quarter. Given the fact that all of its term loans have been repaid and there isn't any requirement for substantial capital expenditure (capex) in the near future, the dividend policy is likely to be more liberal going forward.
- Buy call on the stock with the one-year price target of Rs113.
