Zodiac Clothing & Shasun Chemicals - Good Quarter

Zodiac Clothing - Dress Your Money

The management of the Zodiac Clothing Company Ltd (ZCCL) organized an analyst meet to discuss the Q3 FY06 result and its future prospects. Following are the key highlights of the analyst meet:

• During Q3FY06 ZCCL recorded a 59.1% yoy increase in net sales to Rs. 611mn. The company registered a net profit of Rs. 42mn during Q3 FY06 as against Rs. 33mn during the corresponding quarter last year.


• Operating profit for the quarter stood at Rs. 42mn in Q3FY06 this represents a sharp increase over an operational loss in the corresponding quarter last year. This was mainly driven by a 14.9%yoy decline in staff cost as a percentage of sales. The company’s branded business has continued to grow and has recorded a growth of over 30% by virtue of strong performance in every segment of its Indian operations i.e. Multi Brand Outlets (MBO), large organized retailers as well as the company’s new stores.


• The company currently owns 19 own retail outlets and has plans to expand by an additional 17 stores out of which four stores are expected to commence operations within this financial year.


• The company’s paid up share capital has increased from Rs. 41.8mn to Rs. 83.6mn due to allotment of bonus shares in the ratio of 1:1 during October 2005.


• ZCCL caters to the middle and high end of garment demand where the demand is good and price realizations are also better. This segment requires high focus on designing. The company has design studios set up in London, New York and Dusseldof which enables the company to remain abreast with latest fashion trends.


• ZCCL’s acquisition of a manufacturing facility in UAE could help the company to cater to the US and EU markets cost effectively as there is a possibility of US and EU allowing free trade with UAE which would save duty upto 20% for exports to US and 12% for exports to EU.


• The company’s branded business continues to benefit from expansion of the retail presence across the country, growth of organized retail chains, opening up of the company’s own stores the burgeoning middle class and their propensity to spend. The price pressure in the export market has eased out with safe guard provisions on China imposed by EU and the US. Thus the growth prospects in ZCCL’s domestic business and the export business from India as well as the UAE seem very positive.


• The stock is trading at 28.3x its nine month annualized earnings of Rs. 11.1 (Excluding shoppers stop investment). The company also has 1mn shares of shoppers stop, which if valued at market value would contribute Rs. 59 per share, the stock trades at 21.9x its nine month annualized EPS.

Shasun Chemicals & Drugs - Sweet Pill

Shasun Chemicals and Drugs Ltd. has reported a 43% rise in its net profit at Rs. 129mn, for the fiscal third quarter ended December 31, 2005 compared to Rs. 90.10mn in the corresponding quarter previous year. Net sales grew by 33% to Rs. 984.10mn as against Rs. 738.80mn during the same quarter previous year. Profit Before Interest, Depreciation and Tax increased by 14% to Rs. 205.70mn from Rs. 181mn during the year-ago period. Earnings Per Share (fully diluted) stood at Rs. 5.02 as on December 31, 2005.

Meanwhile, the company has posted a 15% increase in net sales at Rs. 2.55bn for the nine months ended December 31, 2005 compared to Rs. 2.21bn in the corresponding period previous year. CRAM business contributed 12% of the turnover. Net profit increased by 25% to Rs. 233.50mn from Rs. 186.30mn during the same period previous year. Net profit on a consolidated basis for nine months stood at Rs. 242.90mn.

Shasun Chemicals recently entered into a Letter of Intent with the Rhodia Group of France to acquire the pharmaceutical customs synthesis business of Rhodia Pharma Solutions. Both the parties have entered into an exclusivity agreement to progress towards the final Sale and Purchase Agreement, which is expected to be completed by the end March, subject to satisfactory due diligence and regulatory approvals.