Sharp Industries' scrip zooms 900% on growth prospects in user industry
Sanjay Sardana
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New Delhi, Sept 7: Thanks to an upsurge in the business prospects for fast moving consumer goods (FMCG) companies, Sharp Industries' stock has been witnessing a sharp rise in prices. On the back of a secured business from Hindustan Lever, Britannia, Procter & Gamble, Nestle and Dabur, the flexible packaging major, Sharp Industries has posted an excellent growth in earnings for the year ended June 1999.
In anticipation of a turnaround in the business prospects for the packaging industry, the stock zoomed from a low of Rs 6 in May 1999 to the current level of Rs 60. Even after a ten-fold rise in the stock for the past three months, the scrip is trading at a price earning multiple of only 10.
Buoyed by an increasing business from FMCG majors like HLL, P&G, Dabur and Britannia, the company is going ahead with its capacity expansion. Sharp Industries is increasing its capacity to to 7,650 tonnes per annum. The expansion is expected to be completed before the end of this financial year and the improvement inthe company's performance on account of volume expansion would only be visible in the next fiscal.
Further, the capacity expansion augurs well for the company as its thrust on exports has paid rich dividends and the company is already deriving export income from Europe and the US. Annual exports have been around Rs 32 crore out of a total income of Rs 88 crore. The capacity expansion would help the company cater the rising domestic demand as well as take care of exports.
Sharp Industries has posted a 65 per cent growth in net profit on a 25 per cent growth in business. On a constant equity of Rs 9.62 crore, earning per share has improved by 65 per cent to Rs 6.28, thereby improving the scrip's valuation. Despite higher interest cost, depreciation and taxation, the net profit has improved from Rs 3.7 crore to Rs 6.04 crore.
The growth in the last quarter ended June 1999 has been much higher than the average growth for the full financial. The net profit zoomed by 128 per cent on a 28 per cent growth inturnover. Turnover for the fourth quarter stood at Rs 22.61 crore, up from Rs 17.64 crore in the corresponding quarter of previous year. Net profit shot up from Rs 95 lakh to Rs 2.17 crore.
The company's policy of constant modernisation for upgradation of product as well as process and technology and cost reductions have started yielding results. This is visible in the improvement in the profitability margins and NPM has improved from 5.27 per cent to 6.86 per cent for the full year. The NPM in the fourth quarter was much higher at 9.59 per cent against 5.33 per cent in the corresponding quarter of last year. The increasing consumerism demanding better packaging standards, its thrust on exports and the rising demand for flexible packaging are expected to boost Sharp Industries' prospects.
financialexpress.com |
