For the last two months, the Sensex is hovering around 3300 and there appears to be no decisive movement despite some positive corporate performances. Even towards the end of the last week, while the Tech stocks seemed to be in demand, the non-tech shares pulled down the Sensex.  It has become common to attribute the erratic movements of the Sensex to the changes in the sentiments in the American markets. It is therefore heartening to note that an American broking firm has come up with an analysis predicting that the Sensex may reach 4400 by March 2002.

The US-based Salomon Smith Barney (SSB) India Research has observed that, earnings for the top Indian companies in the first quarter of this year were up 21 per cent year-on-year, and we can expect the trend to hold during the year. A good monsoon is also expected to assist in the revival of domestic demand, which will gradually lift the corporate outlook. Hopefully, this should encourage the FIIs and those who follow their footsteps in the stock markets to increase their commitments in the markets and contribute to the market firming up in the next few weeks.

In the mean time, this week we can look at Moser Baer  that seems to be on the verge of a major leap. It was in the news recently for having closed a financial arrangement of around Rs 1048 crores  for its expansion plans. This development has created a possibility of a rapid growth of the company in the next few years.

Moser Baer is in the business of manufacture and export of various data storage devices such as computer floppy disks, CD Rom drives, Tapes etc. It is the world’s eighth largest manufacturer of floppy diskettes with a capacity of 120 million units, having a market share of 2.5 percent in the global diskette market. It is the lowest cost manufacturer in the world with the cost being about 30% to 60% of other manufacturers.

 The Company is now setting up a manufacturing unit of CD-Rs with a capacity of 145 Mn. units per annum. Moser Baer’s entry into the CD Rom market appears to be timely as it matches the growing demand for optical media for data storage. With the new project, the revenue share of floppy disks, which is around 70 % at present, is expected to drop to around 10 %.

In terms of the financial performance, Moser Baer has recorded impressive figures for the last two years. 
 

Financial Performance of Moser Baer:

 

Particulars	1999	2000	2001	2002 (Q1)
Sales (Rs cr)	102.3	154.79	335.98	145.14
Net Profit (Rs cr)	21.15	44.12	138.51	45.38

 

The turnover jumped from Rs 154 crores in 1999-2000 to Rs 335 crores for the year ending March 2001 and the profit after tax increased from Rs 44 crores to Rs 138 crores in the same period. 

During the first quarter of the current year, the turnover was Rs 145 crores, which was more than double the turnover of Rs 70.34 crores  for the same period last year. The net profit for the quarter at Rs 45.38 crores was also around 50 % more compared to the figure of Rs 30.74 crores in the corresponding period last year.

With the achievement of the financial closure and the taking up of the expansion plan, the company will be entering into a major expansion phase. This will test the skills of the Company not only  at the technical level but also the marketing and the managerial level. It would be necessary for the Company to compete with the producers in  countries such as Taiwan and China to capture a decent global market share. While the Indian market itself would be huge, the increasing globalization and free imports can pose a threat to the company unless it can keep its costs to the international level along with the quality of the products.

Considering that the Company has shown the ability to make a success in the floppy disk market, it is possible to place a trust on the Company to make a reasonable success in the optical media also. On an equity capital of 46.8 crores, the current quarter EPS is close to Rs 40 on an annualized basis. In the light of this positive note, the shares, which are presently quoted at Rs 250,  appear to be a good buy. Despite the project risk therefore, the share can be considered for acquisition at the current prices.

Na.Vijayashankar
August 25, 2001