Texmaco

TEXMACO, which is part of the KK Birla group, along with its closest rival Titagarh Wagons, has been a key beneficiary of the Indian Railways plan to acquire 18,000 wagons in 2009-10. 

   However, Texmaco's operating profit margin fell 230 basis points year-on-year (YoY) to 13.9% for the December '09 quarter and that's despite a 43.4% growth in net sales to Rs 238.8 crore. Pressure on the company's operating margins was due to key raw material costs as a percentage of net sales which rose to nearly 440 basis points YoY to 79.8% in the third quarter of FY10. The company's key inputs include steel and allied products, and according to various estimates, domestic steel prices are higher by nearly 11% YoY in the third quarter, as domestic steel prices are quoting at a premium of 8-10% compared with the landed cost of imported steel. The company's net profit was Rs 22.2 crore for the third quarter, a rise of 44.2% YoY, helped by lower interest costs and higher turnover. The quarterly results of Texmaco were declared after the close of trading on Wednesday, but the stock had declined 0.9% to Rs 162.5. However, over the past six months, the Street has been optimistic on the growth prospects of the company, and this stock has surged 94% compared with a 30.7 % rise in the Sensex during this period. 

   In the case of Titagarh Wagons, its stock price had also risen 40.8% over the past six months. Texmaco had recently raised nearly Rs 170 crore through a QIP and it plans to use the funds raised for modernisation of its manufacturing units. It also plans to use a part of the proceeds to fund a joint venture with Australiabased United group for manufacture of metro coaches.