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Analysis of voltas reports 2014

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Analysis of voltas reports 2014

  1. 1. VOLTAS
  2. 2. Contents • Liquidity analysis • Turnover analysis • Profitability • Dividend analysis • Overall performance.
  3. 3. Liquidity Analysis
  4. 4. Particulars Mar ‘14 Mar ‘13 Mar ‘12 Mar ‘11 Mar ‘10 Current Ratio 1.39 1.35 1.41 1.32 1.24 •The Current ratio in the year 2012-13 was 1.35 while in the year 2013-14 it increased to 1.39 •It shows that the Current Assets in 2013-14 have increased in proportion to the Current Liabilities •Investments in the Mar’14 have increased from 26803 to 59271. It shows that the company is planning for expansion •Inventories have decreased from 83273.77 to 71532.67. It depicts the efficient inventory management technique of the company. The company predicts its future sales and thus maintains the stock •Trade Receivables have decreased from 116826 to 105906. It shows the effective collection policy of he management of the company since the total receivables have decreased. •The current liabilities have remain pretty much constant over the years.
  5. 5. Particulars Mar ‘14 Mar ‘13 Mar ‘12 Mar ‘11 Mar ‘10 Quick Ratio 1.02 0.94 1.06 0.99 .70 •The massive decline in quick ratio in comparison to current ratio shows that the Company has a good amount of stock and prepaid expenses. It is not a good sign for the company since this amounts invested in these goods can be put to better use to generate revenue •Despite the presence of large amount of stock the ratio is ideal i.e. 1:1. It means that the company’s resources are enough to meet its current liabilities. •The Acid Test Ratio depicts the same liquidity position of the company.
  6. 6. Turnover analysis
  7. 7. Inventory Turnover Ratio 1) The inventory turnover ratio is the ratio of Sales and Average Stock. It’s a ratio showing how many times a company’s inventory is sold and replaced. 2) In 2013, it was 6.68 whereas in 2014 it was 7.20. 3) The reason behind this fall could be the sharp fall in Sales from Rupees 556543.2 lakhs to Rupees 515135.7 lakhs and the decrease in inventory. 4) This fall of Rupees 41,407.5 lakhs is the main reason behind the decrease in Inventory Turnover Ratio.
  8. 8. Debtors Turnover Ratio 1) The Debtors Turnover Ratio is the ratio of Credit Sales and Average Debtors. It measures a firm’s capability in extending credit and collecting debts. 2) In 2013, it was 4.76 and in 2014 it was 4.86. Thus we can clearly say that there has not been a noticeable change in the ratio. This is mainly due to the reason that Average Debtors has witnessed only a change of 10,920 hence not affecting the ratio drastically.
  9. 9. Creditors Turnover Ratio 1) The Creditors Turnover Ratio of Purchases and Average Payable. It is a ratio which ascertains the speed at which the company pays off it’s suppliers. 2) In 2013, it was 1.13 and in 2014 it was 1.33. Such a tiny difference may be due to the reason that in 2013 Trade Payables amounted at Rupees 152576.46 lakhs and in 2014 Rupees 146103.02 which is a marginal difference. 3) Hence not bringing a big change in the ratio over the two years.
  10. 10. Profitability Analysis
  11. 11. Operating margin (%) 3.17 3.47 5.84 8.75 9.14 2014 2013 2012 2011 2010 • The operating margin is decreasing since 2010 -2014 • The revenue from operations of voltas is decreased from 2013-2014, by Rs.556543.2 – Rs. 515135.7
  12. 12. Gross profit margin (%) 2.81 3.07 5.28 8.43 8.78 Net profit margin (%) 3.43 3.18 2.87 6.77 7.45 • Gross profit decreases since 2010-2014. Wheras • The net profit is increased since 2010-2014 • Expenses being decreased from 2013- 2014
  13. 13. Dividend Analysis
  14. 14. Particulars 2014 2013 2012 2011 2010 Dividend per share 1.85 1.60 1.60 2.00 2.00 Reported EPS (Rs) 5.48 5.44 4.59 10.68 10.40 Cash earnings retention ratio 69.98 72.71 84.03 80.91 76.34
  15. 15. Pricing relative to 10 year average P/E ratio • Last 3 Years Average EPS x Last 10 Years Average P/E Ratio • Voltas’s average P/E ratio for the past 10 years has been around 12 times, while its last 3 years’ average EPS has been Rs 10 per share. Based on the formula, Voltas’s intrinsic value is coming to around Rs 121 per share.
  16. 16. Graham number • As per this rule, the product of a stock’s price to earnings (P/E) and price to book value (P/BV) should not be more than 22.5. • Fair Value Price = Square Root of (22.5 x EPS x BVPS) • Applying this formula, Voltas’s intrinsic value comes to around Rs 100 per share
  17. 17. Dividend discount model • Intrinsic value = Dividend per share/(Discount rate – Dividend Growth Rate) Given that Voltas has paid higher dividends over the years, we use this ‘dividend growth’ formula for calculating the stock’s intrinsic value. • Assuming a discount rate of 15%, dividend growth rate of 12%, and the latest dividend of Rs 2 per share, and inputting these numbers in the above DDM formula, we get to an intrinsic value of Rs 67.
  18. 18. Tangible Assets • Tangible Assets have decreased by 151705 (YoY) or 90% which means that the company has sold an asset, partially shows the effect of depreciation. • It looks like the company has used the money from the sale to increase current investment which inc by 32,467.5 or 121% • The company may have also used the money to reduce current liabilities.
  19. 19. Other current liability • Other current liability has increased by 2624 (YoY) or 4.8%. The increase may be due to the fact that the company decided to purchase other current assets from other current liabilities. • Other current assets have risen by 2488 YoY or 4.01%
  20. 20. Share Capital • The share capital of the company shows almost no change which means the company has not issued fresh equity.
  21. 21. Reserves and surplus • Reserves and Surplus have increased by Rs. 11534 or 7.96% yoy. • A possible reason could be the money transferred from the sale of tangible asset being transferred to the reserve and surplus account
  22. 22. Capital work in progess • Capital work in Progress has increased dramatically from 0.5 to 177 which is a change of 34005% yoy. • This shows that the company has increased its order pipeline and it has got more contracts.
  23. 23. Company’s Overall performance • Performance on the basis of Profitability • Performance on the basis of Shareholder’s wealth • Performance on the basis of working capital management
  24. 24. Performance based on profitability 566239.67 528281.26 136400 141200 18007.39 18148.27 0 100000 200000 300000 400000 500000 600000 2013 2014 Chart Title Total revenue Gross Profit Net profit
  25. 25. Reasons for decrease in Total revenue • Decrease in revenue from operations • Though, the increase in other income is not enough to improve the Total revenue.
  26. 26. Decrease in revenue from operations 561800.39 518816.67 323257.5 352333.97 237293.96 164751.87 0 100000 200000 300000 400000 500000 600000 2013 2014 Chart Title Total revenue from operations Sales contract revenue Contracts of Voltas: Burj Khalifa at Dubai; the F1 track and Ferrari World at Abu Dhabi; one of the world’s biggest water treatment plants at Singapore and the new Sidra Medical and Research Centre at Qatar.
  27. 27. Increase in Other Income. 0 2000 4000 6000 8000 10000 12000 14000 2013 2014 9696.49 13145.58 3246.28 6314.38 Chart Title Total other income Dividend income Column1 Reason: Rohini Industrial electricals Saudi Ensas Co. for engineering services
  28. 28. Reason for increase in Gross profit • Decrease in Cost of goods sold or cost of sales due to various technology improvements and technological contracts and increase in R&D expenditure. • Cost of Sales: 2013- 84071.09 2014-50249.78 • The operating profit is also increased by 11.09% due to a decrease in staff expenses i.e., the salaries due to the expiration or maturity of the contract employees.
  29. 29. Reasons for increase in Net profit • Decrease in cost of materials consumed. • Decrease in the employee benefit expenses. • The decrease in the inventory to 11579 from a negative of 6648.49 is the reason for mere increase.
  30. 30. Performance on the basis of shareholders wealth. Share price:
  31. 31. Contd.. • The company issued 15.6% more than the previously issued dividend. • The adjusted earning per share is increased by 0.40 per share compared to previous year
  32. 32. Performance on the basis of working capital management • The current assets of the company are mainly financed from the shareholder’s funds. • The working capital of the company has increased by 8156.04i.e., 9.54% increase. • Therefore, the liquidity position of the company is satisfactory.
  33. 33. Therefore, the overall performance of the company is good.

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