A major turnaround took place last year. While the working during March 1998 was exceptionally good, the commissioning of its two plants last year provided a major boost to its turnover in the current year. For the first nine months of 1998-99, the company has achieved a turnover of Rs 383.03 crore; which was significantly higher compared to Rs 295.31 crore for the full year in 1997-98.

But much more than the improved turnover, what is impressive is the fact that the company has managed raise its operating profit margin. At 12.97 per cent, the operating profit margins have been much higher compared to 12.58 per centachieved during the first nine months of 1997-98. A major boost however came during the third quarter of this year. The OPM during the third quarter stood at 14.98 per cent; much higher as compared to the 11.2 per cent in the second quarter and 13.1 per cent in the first quarter.

What has helped margins are lower raw material prices. Higher exports, and a shift to more value-added products have also made its contribution. Thanks to a strong earnings growth, the company has managed to maintain its earnings per share despite a bonus issue.

As compared to Rs 50.29, the EPS during the first nine-month (annualised) stood at Rs 48.22 per. The company rewarded its shareholders with a 1:1 bonus issue in November last year.

The outlook continues to be bullish. The company is expected to close the year with sales of around Rs 520 crore. Overall, the company is likely to close the year with an EPS of around Rs 50. The completion of the cephalosporin unit should further provide a boost to turnover in the nextyear.

The company is shifting its focus from oral drugs to steriles which will have a positive impact on the margins. The patents bill too will not have a direct impact on the company's performance as APL has a higher proporation of export sales. Besides, it is into second/third generation bulk drugs which are already off the patent. The company would be concentrating on drugs which are off the patents and supply them into the US generic market.

Overall, the earnings of the company is not dependent on new molecules.The main raw material for the company, pencilin-G has witnessed a continuous drop in prices. The trend is expected to continue and APL would have no problem on this front. While the company is expected to do well on the financial front, the stock growth is expected to show some slow down and is unlikely to repeat the past performance when it appreciated by ten times in less than two years.

Arvind Mills: Negative news discounted

The downtrend on the Arvind counter seems to be comingto an end. The basis of this optimism in nothing but the fact that all the negative news has been fully discounted. The counter witnessed good buying interest in the pre-budget week. However since the budget did not bring any positive news for the company, the rally did not sustain.

The performance continues to be far from impressive. In fact, the performance during the third quarter was discouraging. The OPM during the third quarter dipped to 10.61 per cent, almost half from the first quarter's 18.17 per cent. The OPM during the second quarter stood at 15.77 per cent. Clearly, lower realisations from the main product, denim, has hit the most.

Since the denim market is yet to sow signs of improvement, margins are expected to remain under pressure. However, the company's shift to gaberdine is likely to help in the medium term. The commissioning of new facilities will also help make its contribution. The stock is close to its decade low. Any hints of an improvement in the denim market; which according toanalysts is expected, would attract huge buying interest.