Yuken India net profit crashes down 82%, stock down over 10%

Higher depreciation, increased finance cost and higher salaries led to a drastic drop in the bottomline of Yuken India, a parts and ancillary manufacturer

Yuken India, a parts and ancillary manufacturing company, has reported abysmal results for the quarter ended 30 September 2012. Its net profit plummeted by 82% year-on-year (y-o-y), to Rs41 lakh. However, its net sales declined marginally, by 5% y-o-y, from Rs40.61 crore recorded on 30 September 2011, to Rs38.70 crore for the current September quarter. The culprits were higher depreciation, interest costs and higher salaries. The stock tanked by 10.98% on Bombay Stock Exchange (BSE) and ended the day at Rs150.40.

An analysis of Moneylife database on the company shed some light on the reason for poor performance. In fact, this is the first time in four years that sales have actually declined. Until then, it had been growing steadily and consistently. Global economic troubles meant that the export market was challenging, with demand falling. However, what is worrying the company is its operating parameters. Its operating profit plummeted by a whopping 47%, which is way below its three-quarter y-o-y average of -13%. Higher salaries meant retention of talent in tougher times. It suffered badly only in the last two quarters, whereas before that it was growing steadily. However, the biggest blow was the net profit, which declined by 82%. This was due to higher depreciation and finance cost, which increased by around 66% and 50%, respectively. Despite this, the company has a decent return on equity (ROE) of 18%. Its valuation is on the lower end, with market capitalization at over five times operating profit.

The company has a tie-up with Yuken Kogyo Company (YKC), based out of Japan, which holds 40% of the joint-venture while Indian promoters—Benefic Investments and Finance, along with the Rangachar family—hold around 12.54%. This shareholding pattern has been the same for a long time, indicating total commitment to the business. In the past 34 years, YIL has achieved the fastest growth rate in the oil hydraulics segment in India. Most manufacturers of original equipment have accepted YIL as their preferred partners for hydraulics.

Yuken India manufactures pumps and valves for major industrial segments including steel plants and steel mills, machine tool manufacturers, plastic machinery manufacturers, defence, automobile manufacturers, hydraulic presses, drill rig manufacturers, power projects and the cement industry.


BHEL shares falls over 6% on disappointing Q2 results

BHEL reported nearly 10% decline in net profit at Rs1,274.5 crore for the second quarter

Mumbai: Shares of state-run BHEL on Monday fell over 6% wiping off Rs3,672 crore in investor wealth after the state-owned company reported nearly 10% decline in net profit for the quarter ended September 2012, reports PTI.


Following the disappointing results, shares of BHEL fell by 6.64% to finally settle at Rs227.25, down 6.19% on the BSE. At NSE, the scrip closed at Rs226.50, down 6.58%.


In the process, the market capitalisation of the company plunged by Rs3,672 crore to Rs55,621 crore.


"The stock was hammered not only because the results were below street expectation, but also the outlook at least for next 1-2 years is weak," Nagji K Rita, CMD, Inventure Growth & Securities said.


According to Rikesh Parikh, Vice President, Markets Strategy and Equities, Motilal Oswal Securities: "The key concern of erosion in the company's order backlog remains."


BHEL today reported nearly 10% decline in net profit at Rs1,274.45 crore for the second quarter ended September 2012. The power equipment major had net profit of Rs1,412.03 crore in the July-September quarter of last financial year.


BHEL said that its income from operations in the July-September quarter grew a little over 2% at Rs11,009.28 crore, from Rs10,758.08 crore in the same period last fiscal.


Belying FM’s confidence, fiscal deficit will not reduce

The measures announced by the government will be insufficient to contain the fiscal deficit at 5.3% of GDP in FY13 due to higher subsidies and lower tax revenues, says Nomura Economics Research

The fiscal and current account deficit of India have been getting out of hand. As a proportion of budget estimate, fiscal deficit during April–July 2012 was 51.5% and revenue deficit was 61.3%. The fiscal deficit in rupee terms as per the budget estimate was Rs5,13,590 crore. For the period April-July 2012, the fiscal deficit was Rs 2,64,432 crore. The finance ministry expects the current account deficit to narrow to 3.7% of GDP ($70.3 billion) in FY13 from 4.2% of GDP ($78 billion) in FY12.
To address these problems, finance minister P Chidambaram today announced a new fiscal consolidation road-map. According to his hopes:
Fiscal deficit is to be reduced to 5.3% of the GDP in FY13 (Budget: 5.1%) from 5.8% in FY12, to 4.8% in FY14 and by 0.6 percentage points every year to 3% by FY17 (year ending March 2017).
Disinvestment to be a big push with a number of companies identified to attain this year’s targeted revenue of Rs300 billion.
The finance minister is confident of meeting the budgeted tax revenue, disinvestment, and telecom spectrum targets for FY13.
To contain plan and non-plan expenditure.
Despite fiscal consolidation plans, all flagship schemes are to remain untouched, to protect the poor.
The government is committed to introducing the goods and services tax (GST) and will review the Direct Tax Code.
Increased reliance on direct cash transfers to cut leakages on subsidies.
Will this work? The market’s verdict is negative. Even as the FM was finishing his speech, the market, which was firm since morning started to go down and slipped into the red. 
Nomura Economics Research, in its First Insights Report, has said that the roadmap is a step in the right direction, but it lacks detail.
The measures announced will be insufficient to contain the fiscal deficit at 5.3% of GDP in FY13 due to higher subsidies and lower tax revenues, says the investment bank. Moreover, as with other reform measures announced so far, implementation remains the key.
Nomura suspects that the timing of the announcements (one day ahead of the RBI policy meeting) suggests growing political pressure on the RBI to cut rates tomorrow. In the absence of any credible plan to lower the fiscal deficit, Nomura anticipates no repo rate cut tomorrow, with only a 25 basis point cash reserve ratio (CRR) cut. 


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