The company reported good set of numbers for the third quarter ended December 13 with 6% increase in the topline and 35% increase in Net Profit.

The earnings were noteworthy given the depressed auto industry scenario in the country for quite some time now. There was improvement in the company's performance at operational level. Drop in forex gain during the quarter restricted net profit growth. But at the same time, substantial reduction in tax provision, boosted the bottomline.

Munjal Showa products serve as original equipment to a wide range of Maruti Suzuki upper end cars and export models, Honda City car, complete range of Hero Motorcycles, Kawasaki Bajaj Motorcycles, and Hero range of mini-motorcycles and mopeds and Honda Motorcycles and Scooters India (Pvt) Limited. In over a decade the Company's state-of-the-art Shock Absorbers, Front Fork, Struts and Window Balancers/Gas Springs have become symbols of reliability and quality for popular two and four wheeled vehicles.

Quarterly Performance

For the quarter ended Dec 13, the company has reported 6% increase in the total income from operations at Rs 416 crore. The raw material cost as % of sales net of stock adjustments was steady at 74.4%. Margins would have improved further but for rise in employee cost. The other expenses (as % of sales net of stock adjustments) fell 90 bps to 13%. Employee cost rose by 10 bps to 5.2%. Resultantly, Operating margins increased by almost 80 bps to 7.3% (against 6.5%) leading to a 20% rise in operating profit to Rs 30.6 crore.

With 64% rise in other income to Rs 46 lakh (vis a vis Rs 28 lakh), PBIDT increased by 20% to Rs 31 crore. The company's interest cost fell by 69% to Rs 60 lakh and depreciation charges rose by 5% to Rs 7 crore. After this PBT before forex loss/gain rose by 36% to Rs 23.42 crore. Forex gain for the quarter stood at Rs 66 lakh (vis a vis loss of Rs 2.35 crore last year), a drop of 72%. Thus, profit before tax increased by 23% to Rs 24.08 crore. After 31% drop in tax provision at Rs 2.46 crore, (800 bps drop in tax rate), the company's net profit rose by 35% at Rs 21.62 crore.

Nine month Performance:

For the nine months ended December 13, the company has reported marginal drop in the total income from operations at Rs 1181 crore. The company has witnessed decline in the raw material cost. The raw material cost as % of sales net of stock adjustments has declined 50 bps to 74.3%. The other expenses (as % of sales net of stock adjustments) decreased 50 bps to 13.4%. Resultantly, Operating margins rose by 40 bps to 6.6% (against 6.2%) leading to a 6% rise in operating profit to Rs 78.4 crore.

With good help from rise in other income to Rs 4.93 crore (up by 279%), PBIDT increased by 11% to Rs 83.3 crore. The company's interest cost fell by 58% to Rs 2.31 crore. Depreciation charges shot up by 8% to Rs 21.5 crore. After this PBT before forex loss/gain rose by 19% to Rs 59.52 crore. Forex loss for the nine months stood at Rs 1.57 crore (vis a vis gain of Rs 42 lakh in last year). Thus, profit before tax before EO increased by 15% to Rs 57.95 crore. The company had incurred an EO expense of Rs 6.14 crore in 9M FY 13. Thereafter PBT after EO rose by 31% at Rs 57.95 crore. After 19% rise in tax provision at Rs 7.08 crore, (120 bps drop in tax rate), the company's net profit rose by 33% at Rs 50.87 crore.

For the year ended March 13, the company had reported strong 2% increase in the net sales at Rs 1582 crore and 10% decrease in the Net Profit at Rs 60.7 crore.

Good monsoon has already led to revival in demand for two-wheelers and Munjal Showa is a key supplier of components for two-wheelers. Its main clients Honda Motorcycles and Hero Motocorp, both are on the growth path in domestic market as well as have substantial export plans.

• The promoters' share in the total shareholding was steady at 65.01% in Dec 2013. Promoters have pledged nil shares in the company.

• The company announced its earnings on 05 February 2014. The scrip is hovering 4.3% higher at Rs 75.5 at BSE on 06 February 2014.