Sanghvi Movers Ltd (SML)’s Q1FY2010 total income from operations came in at Rs82.6 crore, implying a growth of 5% year-on-year (y-o-y).
The growth was better than our expectations probably because of better than expected utilisation of the fleet during the quarter.
The operating profit grew by 9% to Rs62.8 crore as the operating profit margin (OPM) improved by 280 basis points to 76%.
The improvement in the margin was primarily driven by lower operating expenses that declined by 10.4% on an absolute basis and by 280 basis points yoy as a percentage of sales.
The other income rose sharply by 80.6% to Rs2.4 crore, possibly on account of the sale of old cranes. The interest expenses and the depreciation charge rose by 21.2% and 26.4% to Rs12.3 crore and Rs18.6 crore respectively during the quarter.
Consequently, the net profit of the company rose 1.8% y-o-y to Rs23.1 crore, which is better than our estimate on account of a marginally better core performance and a higher other income during the same quarter.
At the current market price the stock trades at 6x FY2011 estimates. We maintain our BUY recommendation on the stock as we like the company’s unique business model.
Also, with its fleet of cranes, the largest in the country, the company would be the key beneficiary of the buoyant infrastructure spending in the country.