But other players such as M&M, Escorts and HMT seem to have shown a better growth in the second quarter. While the sales growth at M&M was down by 7.6 per cent in the first quarter, the overall growth in the first half show a lower decline of 4.5 per cent. Similarly, HMT has also reduced its sales drop from 24.5 per cent in the first quarter to 13.5 per cent in the first half. This shows that the these players have improved their performance in the second quarter.

For PTL, volume slowdown reflects in the sales. For the second quarter, the company has posted a sales ofRs 209.10 crore, up by 13.19 per cent from Rs 184.73 crore in the corresponding period in the previous year but down by 11.48 per cent from the first quarter.

This fall appears very sharp if one were to compare previous year's figure when second quarter's sales was up by 5.2 per cent over the first quarter sale of Rs 175.57 crore during 1997-98. This clearly show that things are taking a negative turn for PTL.

But this does not mean that everything has gone wrong. Although sales have shown a decline, the company has managed to improve its margins, which is certainly not an easy task in the current scenario. During the second quarter of 1998-99, operating profit stood at 17.69 per cent, up from 17.31 per cent in the first quarter.

Perhaps, this could be the reason why the stock has gone up. Besides positive sentiment, the stock was also fuelled by the fact that the FII investment limit in PTL has been raised to 30 per cent. If the FIIs are seeking an exposure in the tractor industry, they will have totake a position in PTL.

While the outlook for tractor sales is not promising, PTL posseses the ability to perform better than the industry due to its strong presence in the western market and better working capital management.

Over a longer period, a merger with Swaraj Engine (a group company which supplies the engines fitted onto tractors manufactured by PTL) is also expected. This step if implemented can give a further boost to the company's margins as well as the stock discounting.

Century Textiles

Except for improved sentiment, Century Textiles' stock did not have a reason to go up. The company's performance has only worsened. As against a Rs 13.81 crore loss in the first quarter, the company has posted a net loss of Rs 24.77 crore in the second quarter of 1998-99. The loss mounted despite a 59.25 per cent jump in other income to Rs 20.91 crore. In the first quarter other income stood at Rs 13.13 crore.

A clear picture can be reflected in operating profit margins which have further dippedfrom 12.50 per cent to 8.81 per cent in the second quarter. It would be unfair to compare second quarter with the first quarter performance as around 37 per cent of revenues come from the cement division which normally have a lower sales in the second quarter due to monsoon.

But otherwise also, performance has been far from impressive. While sales grew by 2.5 per cent in the first half of 1998-99, operating profit margins have declined from 12.03 per cent to 10.68 per cent. Bad conditions in cement, textile and paper are responsible. While the textile division contributes 37 per cent to the total sales, the paper division's contribution is around 17 per cent. The rest comes from chemicals etc.

While the first half's performance has been bad to say the least, the future outlook is discouraging. Although the government has announced a huge investments programme in infrastructure which should give a boost to cement demand, it will be a while before it materialises. The situation in textiles, especially indenim, where the company entered last year is equally discouraging. The story in paper is no different. While the demand factor would continue to go against Century in future, the huge interest burden will continue to play its role. Interest burden has remained above Rs 50 crore in the second quarter, much higher than the operating profit.

As such, the recent surge in stock price should be considered temporary as fundamentals will take time to change. In fact, shareholders can exit at higher levels and shift to a defensive stock.