CMC Outperforms Industry - Accumulate

Shrikant / 13 Jul 2012

CMC Limited, a subsidiary company of TCS, announced its results on July 12, 2012 after which the stock price of the firm moved by 11.33 per cent on the same day. We expect the company to outperform its peers in the future because of its well-balanced and favourable product mix

CMC Limited, a subsidiary company of TCS, announced its results on July 12, 2012 after which the stock price of the firm moved by 11.33 per cent on the same day. The operations of CMC are well-diversified and their operations include IT infrastructure development, systems integration, IT-enabled services and education & training.

CMC announced their revenue to be Rs 452.28 crore for Q1FY12-13 which is a 10.60 per cent increase from Rs 408.92 posted for the last quarter of FY11-12. The topline for the firm is the highest ever posted and the company has evidently outperformed the industry. This robust growth is also accompanied by a net profit of Rs 58.43 crore, which is 36.11 per cent higher from the sequential Rs 42.93 crore.

The operating margin of the company improved from 13.12 per cent to 15.44 sequentially. The net profit margin too saw an increase from 10.50 per cent in Q4FY11-12 to 12.92 per cent in Q1FY12-13. The company has a fair amount of revenue generated from equipment and IT hardware and has lately been facing massive hindrance due to the depreciating rupee considering the fact that about 85 per cent of the components required in the industry are imported. CMC, in FY11-12, was dependent on this side of the industry for about 10.51 per cent of revenues. 

Revenue Mix For FY12

Income Category

Rs Crore

% Share

Equipment

154.13

11

Services

1,312.83

89

Total

1,466.96

100

Geographical Revenue Mix For FY12

Geographical Revenues

Rs Crore

% Share

Domestic

582.82

40

International

884.14

60

Total

1,466.96

100

Moreover, in FY11-12, 60.27 per cent of the company’s revenues came from international sources - far lesser than the traditional IT companies, benefiting the topline of the company. In terms of revenue, all the segments performed well sequentially other than education & training, which saw a negative growth of 6.46 per cent. IT-enabled services too grew modestly by 3.39 per cent.

Revenues and Profit For FY11 And FY12


 Particulars

FY12

FY11

Revenue

1,466.96

1,080.53

Net Profit

151.81

179.41

The company has been seeing growing revenues from its SEZ unit, the segment through which the firm is developing a SEZ at Hyderabad and generating revenue from renting units out after which it has also set up a SEZ in Kolkata. We expect the company to outperform its peers in the future because of its well-balanced and favourable product mix. We would suggest investors to accumulate the stock for future gains.

Results Announced By CMC Ltd For Q1FY13 (in Rs cr.)


 Particulars

Q1 FY12-13

Q4FY11-12

% Change

Revenue

452.28

408.92

10.60

EBIT

69.83

53.65

30.16

Net Profit

58.43

42.93

36.11

Operating Profit Margin (%)

15.44

13.12

Net Profit Margin (%)

12.92

10.50

Segment-wise Revenue For Q1FY13 And Q4FY12 (in Rs cr.)

 Segment

Q1FY12-13

Q4FY11-12

 % Change

Customer Services

90.17

82.9

8.77

Systems Integration

264.38

236.46

11.81

IT-Enabled Services

71.35

69.01

3.39

Education & Training

13.89

14.85

-6.46

Special Economic Zone

12.48

6.67

87.11

Total

452.27

409.89

10.34

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