For December 1998, the sales growth was at 6.48 per cent. But what was impressive was the fact that during the time of stiff competition, the company has managed to retain its profit margins. OPM stood at at 6.99 per cent, marginally lower compared to 7.04 per cent during 1997.

Even if one were to compare sales growth with other players, Philips' performance has been decent. For the nine month period ended December 1998, BPL has recorded a growth of 6.94 per cent. During the thirdquarter (September-December) at Rs 518 crore, BPL recorded a negative growth of 6.7 per cent. At the same time, Philips' growth was down by less than one per cent. For September-December, the company posted a sales of Rs 482.32 crore. For this period, the performance has been impressive on the operational levels. The company has achieved an OPM of 10.4 per cent -- much higher compared to 7.73 per cent during the corresponding period in the previous year. A fall in interest burden has further provided cushion to the bottomline.

Overall, the performance has been impressive. The latest move upto Rs 135 should be considered as a bullish signal. But the final confirmation of an uptrend would come only once the stock crosses the Rs 137 level. Technically, once this level is crossed, the next target can be placed at Rs 173.

The budget has not brought anything in special for the consumer durable manufacturers except modvat benefits. While stiff competition would continue to have its impact on Philips'performance, restructuring will help curtail its cost.

Indian Rayon: No recovery in sight

Indian Rayon's shareholders have nothing to cheer about. The first two months have witnessed a huge selling on Indian Rayon's counter. The stock had fallen from Rs 110 to Rs 74 two weeks ago. But the fall did not come as a major surprise. The financial performance of the company continues to be bearish. The results during the second and third quarter were far from impressive. For the second quarter, on a sales of Rs 401 crore, the company has posted an operating profit of Rs 77.58 crore. The margins on the operational front works out to 19.30 per cent -- down compared to 22.81 per cent achieved during the first quarter (April-July). In fact, the downtrend in margins has been a one-and-a-half year old phenomenon.

The fact, at least in the past two months, that could have helped the stock is the optimism for the cement business. But since the cement business is being transferred to Grasim, the company nowdepends on viscose filament, carbon black and water magnesia businesses. The condition in all these sectors is far from impressive. But more than the dismal outlook for the sector, what is important is the fact that the stock market perception for these business is extremely negative. And this is a bigger problem for Indian Rayon shareholders.

As for the future, since the stock market has already factored in the shift of cement business to Grasim, a further fall from this level based on this factor is not likely. For the shareholders of Indian Rayon, the shift would mean an additional 30 shares of Grasim for every 100 shares held in Indian Rayon. Since the cement business used to contribute 49 per cent to the sales, the future sales would drop in that proportion. Similar can be said about the profits. But since the equity would remain the same, the fall in earnings per share would be drastic. As such, unless the outlook for carbon black and textile sector improves which is highly unlikely in the short run,the stock will not show a recovery.