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S. Muralidhar

SHAREHOLDERS of Macmillan India can consider paringexposures to the stock at Rs 236. The stock discounts its latest full year earnings by about 16.5 times and has nearly doubled from the post-bonus low of Rs 120.

Macmillan had posted lower income and profits during the first quarter of this year (January to March) compared to the corresponding previous quarter.

As a result, the earnings per share had slid to Rs 5.7 compared to Rs 7.54 reported during the quarter-ended March 2002. The company's operating profit margin also fell during the first two quarters of this year, possibly due to its increased focus on high volume, low margin, school textbooks segment.

However, during the second quarter ending June 2003, the company doubled its revenues and net profit. Macmillan's total income at Rs 33.7 crore and net profit of Rs 11 crore was up compared to the income of Rs 16 crore and profit-after-tax of Rs 5.6 crore in the corresponding quarter of calendar 2002.

The company's improved performance during the second quarter could have been due to its increased focus on textbooks and other educational material, including a revival of demand from the Government and institutional segments.

The company's information processing business, a new thrust area for Macmillan, grew 28 per cent during 2002 and contributed about 48 per cent to sales.

Last year, the company undertook a major restructuring exercise to rationalise its distribution network to reduce the debtor's level and to recycle the stocks lying with distributors, resulting in lower investment in new printings.

This was largely the reason for the exceptional sales returns from the publishing business during the 2002 calendar. There are two initiatives that could increasingly go in Macmillan's favour during the current fiscal. They include its new strategy for the publishing business, a further foray into the vernacular medium, and an increased focus on higher secondary and university segments.

The company is also diversifying into other information processing services such as advertisement composition, data conversion and coding, industrial documentation and cataloguing.

While partial-booking of profits may be considered at the current price, given the company's earnings potential, investors may retain it within their portfolio for potential medium-term returns. Re-entry may be considered at lower price levels.

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