Moser Baer: Rising margins

MOSER Baer is one of the few stocks which had made a bottom during the month of January and managed to remain firm in the recent crisis.

After hitting a bottom of Rs 183 during mid-January, the stock has steadily improved to Rs 265. Considering recent beating of technology related counters, the performance of this counter is certainly impressive.

And the reason for this performance is not far to seek. The company has managed to come out with impressive results. For instance, during the fourth quarter, the company managed to post a 94 per cent growth in its net profit to Rs 38.55 crore. The net profit during the corresponding period in the previous year stood at Rs 19.8 crore.

Not only this, the company has managed to improve its profit margins smartly. OPM during the fourth quarter stood at 52.06 per cent — significantly higher compared to 47.21 per cent in the corresponding period in the previous year.

For the full year March 2001, while sales grew by 117 per cent to Rs 335.97 crore, net profit has risen from Rs 44.11 crore to Rs 138.50 crore. OPM for the full year improved smartly from 37.95 per cent to 53.70 per cent.
While the past performance has been impressive, the the outlook continues to remain bright. The only producer of magnetic and optical media in the data storage industry, Moser Baer is one of the top five floppy diskette manufacturers in the world.

The recent entry into compact discs (CD-Rs) has also yielded positive results. The acquisition of Capco SA of Luxembourg helped the company to increase its presence in the European markets.

The company has a CD-Rs capacity of 150 million units which will increase to 380 million soon. The manufacturing facilities have the flexibility to produce digital versatile discs (DVDs). The company is on an expansion spree and its capacity is likely to increase to 760 million units in the next two years.

As demand for its products is on the rise, the company will continue to increase its revenue at a good pace. The company has managed to increase its profit margins in the recent past and even if the company maintains them at current levels, a boost on the revenue front will ensure a smart rise in earnings.

While the earnings are expected to show an impressive growth, the market discounting may not show a sharp rise due to fear of an equity dilution for its expansion programme.

As far as technical position of this stock is concerned, it has been impressive in the last three months, and for those who hold a long position, things will remain positive till the level of Rs 200 is broken. One should make an exit once this level is broken. It has a resistance at around Rs 350.

Deepak Singh Tanwar The author does not hold a position in the stock mentioned above