Impressive results fail to perk up Valson Synth scrip

Mumbai, July 3: Thanks to a general recession in the industry, the Valson Synthetic Ltd VSL scrip has been hovering around the Rs 30-mark for the last 9 months. Even an impressive show from Valson Synthetics has failed perk up its scrip. The company has posted decent results for the financial year ended March 31, 1998. Net sales have soared by a whopping 41.9 per cent to Rs 42.95 crore. In volume terms, sales grew by a sizeable 48 per cent over the previous year mainly due to higher operational efficiency of its plants. Incidentally, the texturising, twisting and dyeing units operated at 97 per cent 2619 mt, 92 per cent 1748 mt and 73 per cent 1642 mt. More importantly, the value added dyed yarn unit comprised of 63 per cent of sales against 60 per cent in fiscal 1997.

Operating profit has risen by 57.68 per cent to Rs 5.4 crore. Operating margins also moderately increased to 12.77 per cent from 11.37 per cent. Company sources attribute this to the effective control of the raw material cost per unitby 8 per cent. In the current year, VSL is considering investing in a cotton yarn dyeing unit at Rs 1.5 crore. Despite a 92 per cent increase in interest expenses to Rs 0.97 crore coupled with depreciation rising by 74 per cent to Rs 0.85 crore, the bottomline has risen by 48 per cent to Rs 3.59 crore. On an EPS of Rs 11.67 and a dividend per share of Rs 2.5, the dividend cover works out to 4.66.

In the future, the company would be adversely hit by the increased excise duty on dyed yarn, increase in raw material prices of PFY and lesser availability of MODVAT credit in the recent budget. Company sources say a price hike could be in the offing as the raw material cost per kg might increase by Rs 8. It is evident that VSL8217;s future profitability is dependent on its ability to cater to the shirting and suiting, labels, upholstry, knitting and baggage industry.