Aditya Birla Nuvo Q2 net profit doubles to Rs214 cr

Diversified conglomerate Aditya Birla Nuvo (ABNL) has reported a two-fold jump in its consolidated net profit to Rs 214.25 crore for the second quarter ended September 31, 2011, on the back of robust growth across its various businesses. The Kumar Mangalam Birla-led group's holding company had a net profit of Rs 104.79 crore in the year-ago period. However last years profits included a one time exceptional loss of Rs 104 crore on account of losses reported by Aditya Birla Money and Aditya Birla Money Mart.
 
Consolidated revenues increased to Rs 5,342 crore in the second quarter of current fiscal, from Rs 4,533 crore in the year-ago period registering a decent growth of around 18 per cent. EBIDTA rose by 25 per cent from Rs 621 crore is Sept 2011 to Rs 779 crore. EBIDTA margins also improved by 95 bps to 14.58 per cent as against 13.36 per cent reported in Q2FY11.

On a half yearly basis, consolidated revenues in H1FY12 grew by 20 per cent to Rs 10109 crore as against Rs 8390 crore in the year-ago period. EBIDTA went up by 35 per cent to Rs 1587 crore and the EBIDTA margin improved by 167 bps to 15.69 per cent which was led by improving business in the financial services segment and followed up by telecom. The net profit came in at Rs 467 crore, registering a growth of 83 per cent over last years figure of Rs 254 crore (incl. of exceptional loss).

Commenting on the results, Dr. Rakesh Jain, MD said, “Aditya Birla Nuvo has strengthened its leadership position in financial services, telecom and fashion and lifestyle business. It has posted strong earnings even amidst challenges of prevailing macro-economic environment that affected few businesses. This only reflects the strength of its conglomerate model.

Revenue Mix

Business-wise Review

1. Financial Services: Aditya Birla Financial Services continued to augment its market position as a significant NBFC. While the Life Insurance and Asset Management businesses improved their rankings, the NBFC arm scaled its book size and diversified the portfolio. Currently ABFS has an AUM of Rs 88300 crore. For H2FY12, ABFS reported a consolidated revenue to Rs 2929 crore, a growth of 4.5 per cent over the previous year. It displayed a strong growth in profitability as the EBIT more than doubled to Rs 298 crore from Rs 100 crore in the previous year. Key Highlights for ABFS are:

• Birla Sun life Insurance improved its ranking to 4th among private sector players and saw its market share improve for 7.6 per cent to 8.7 per cent.
• Birla Sun Life Asset Management moved one step up to rank 4th with market share of 9 per cent. Total AUM stands at Rs 67987 crore up by 5.4 per cent on q-o-q basis.
• ABNL’s NBFC arm, Aditya Birla Finance diversified its portfolio by adding infra financing which helped bolster its book size. Going forward the management expects significant growth prospects out of its infra financing venture.

2. Telecom: ABNL’s 25 per cent subsidiary Idea telecom has continued to gain revenue market share. It stands enhanced at 13.9 per cent up from 13 per cent a year ago. Baked by a 100 million subscriber’s base and coupled with a high active subscriber’s ratio, Idea has built a strong platform for future growth. The revenue grew by decent 25 per cent to Rs 9160 crore, however net profit de-grew from Rs 518 crore to Rs 283 crore on account of introduction of 3G services which saw some additional expenses of amortization of spectrum fee charging of related interest cost.

3. Manufacturing: The revenues grew by 33 per cent to Rs 2861 crore,  which was largely driven by higher linen fabric volumes, robust performance in agri-products trading business and increased realizations in carbon black, rayon, textile and agri-business reflecting pass on of rise in production costs. However the company could not pass on all of its production costs and as a result the EBIT margins de-grew by 308 bps to 11.53 per cent. Going forward the management expects some excellent opportunities coming its way in the agri-business given that the govt. favorable de-regulation policies find the light of the day.

4. Fashion & Lifestyle: Madura Fashion achieved 30 per cent y-o-y growth in revenue at Rs1077 crore on the back of 28 per cent volume growth. The retail channel attained an overall 39 per cent sales growth led by 15 per cent like-to-like stores sales growth and retail space expansion. Madura continued to strengthen its retail presence by launching 160 exclusive brand outlets to reach a total of 1021 outlets spanning across 1.5 million sq. feet.

5. IT/ITES: Aditya Birla Minacs (ABML) has sold total contract value of USD 243 million and won 12 contracts during first six months. Revenue grew by 19 per cent on a y-o-y basis to Rs 951 crore supported by conversion of order book and forex movement. However slower ramp up I new contracts constrained margins and saw the bottom-line de-grow. Going forward, management expects sales pipeline to witness some headwinds owing to weakening of US and European economy.

In conclusion, ABNL has reported a decent set of cons. half yearly numbers led by robust performance in its manufacturing, telecom and fashion & lifestyle businesses which saw good revenue growth. The financial services arm led the profit walk followed by telecom. Finally improved set of earnings led to a strong bottom-line. On the valuation, at CMP of Rs 961 the counter is available at a PE of 11.66x its cons. annualized EPS of Rs 82.36.

Financial (Consolidated)