>USHA MARTIN LIMITED (GEPL)

BAD QUARTER BRIGHT FUTURE

UML came out with its 1QFY10 result which was dismal at operating level. However, the Company maintained its non-operating expenses (depreciation, interest cost) at lower levels during the quarter. Performance of domestic business was quite subdued primarily due to lower realization as well as high cost of raw materials. All the subsidiaries, however, performed well, despite lower sales volume, with significant improvement in margins. We are positive on the business outlook of UML and expect the Company to perform better from
2QFY10 onwards. Maintain 'Buy'

UML (standalone) 1QFY10 performance
UML reported 17% y-o-y fall in net sales primarily due to fall in realizations of steel products. EBITDA was down 46% y-o-y due to higher cost of raw materials. EBITDA margin fell from 27% in 1QFY09 to 18% in 1QFY10. Net profit fell even by a higher percentage of 76% mainly due to higher tax rate. EPS for the quarter stood at Rs.0.5 compared to Rs.2.3 in 1QFY09.

Subsidiaries performance
Subsidiaries performed well during 1QFY09 and compensated to the dismal performance of standalone business. Despite 2% y-o-y fall in net sales, EBITDA and net profit increased by 40% and 122% respectively during the quarter primarily due to higher realization of value added products and lower tax rate. The calculated EPS for the quarter stood at Rs.0.7 compared to Rs.0.3 in 1QFY09.

To see full report: USHA MARTIN