Gujarat Alkalies Net Grows By 82.61% in Q4FY13

Gujarat Alkalies and Chemicals (GACL) announced its Q4FY13 results on May 16, 2013. The company posted an impressive set of numbers thus enhancing our positive outlook on the performance of the scrip.

We had recommended GACL in Dalal Street Investment Journal (Volume 28 Issue No. 10), when it was trading at a price of Rs 172 per share. It is now trading at Rs 185.80 per share, which is an appreciation of 8.02% in 25 days.

In Q4FY13, the revenues of GACL increased by 10.46% to Rs 472.12 crore as compared to Q4FY12. Its EBIT increased by 61.85% to Rs 118.88 crore and its net profit increased by 82.61% to Rs 80.73 crore. 

This translates into improved margins for GACL. Its EBIT margin expanded by 799 basis points to 25.18% and its net profit by 676 basis points to 17.10%. So what helped GACL improve its margins?

In Q4FY13, it witnessed a 47% decline in its other manufacturing & operative expenditure and 87% in its other expenditure. These were the major drivers in the improvement of operating margins for GACL. Moreover, the company also saw better price realisation during the year in majority of its products barring Chloromethanes, Aluminium Chloride and Chlorinated Paraffin Wax. The company also took several cost cutting measures to improve efficiency.

GACL saw a significant improvement in its bottomline. The major contributor to this was a reduced finance cost. In Q4FY13, the finance costs amounted to Rs 0.67 crore as compared to Rs 4.03 crore in Q4FY12.

Although the environment that GACL operates in is challenging because of competitive market conditions and a depressed economic scenario, the performance of GACL has been consistently good. Despite troubles on maintaining volumes, the company has not only maintained strong revenue growth but also shown improved efficiency. We maintain our bullish outlook on the company.