Tide Water India has posted benign results amidst an industry downturn although its sales went up
We had recommended investing in Tide Water Oil Co in our Moneylife issue on 1 November 2012 . The company has announced its third quarter result for the fiscal ending March 2013. It recorded benign sales at Rs216.40 for the December 2012 quarter, 4% higher than the corresponding period last year. However, its net profit declined 9% to Rs14 crore for the three month ended December 2012, when compared to the same period last year. The difficulties in the automotive market meant trouble for ancillaries, as well.
According to the Moneylife database, net sales declined 4% which is four percentage points below its three-quarter year-on-year (y-o-y) average of 8%, not too bad considering the dire circumstances of the automotive ancillary industry. However, what is worrying is that operating profit has declined and slipped into negative territory, when it went down 4%, at Rs21.60 crore, compared to its three quarter y-o-y average of -2%. The operating profit in the last few quarters has been erratic and somewhat sluggish, reflecting the realities of the automotive market. However, having said this, its return on equity remains healthy at 19% while valuations seems fair with its market capitalisation quoting at over eight times is operating profit.
The shareholding pattern has remained almost the same since we recommended the stock, and is tightly held: little over 26% are owned by promoters, roughly 14% owned by financial institutions mostly notably insurance companies, less than 3% are owned by trusts while 34% and 22% are owned by bodies corporate and retail investors respectively.
The Andrew Yule company which specializes on automotive and industrial lubricants has the global rights for the master brand ‘Veedol’. It also has technical collaboration with JX Nippon Oil and Energy Corporation (Japan). It has been a pioneer, which went to decline and now reviving in a tough market.
We had recommended the company when its price was Rs7,875.85 on 1 November. The stock was Rs8,115 on the National Stock Exchange, and was up 0.58% at end of day. We also had recommended it back in 2011.
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