Another very important point to be kept in mind which is often ignored but has very very serious long term implications is the amount of amortization charged to the P&L account to arrive at net profit/EPS.
For this quarter as was for previous quarters….the amortization charged was rs 11 cr. This amortization was charged because JLL had acquired Henkel a few years ago.
If you think deeply, the brand/goodwill/franchise value of Henkel brands is only increasing under JLL. But still, as per GAAP, (ALAS!!!) they need to wear it down to zero in their balance sheet by charging it in their P&L account.
So, in order to calculate owner earnings (so to say….i m quoting warren buffett here) we can safely add back Rs 11 crore and hence actual net profit would be rs 49 cr instead of 38 cr….a jump of whopping 30%(aprox)
On an anualized basis ( if we double up the half year earnings of JLL and add 30%) the total nett profit will be Rs 84cr*2=Rs 164 cr plus 30%= 212cr (APROX)….which will amount to an EPS of Rs 12
If you also add Rs 36 cr charged on anual basis against ESOP as it will not exist by next year….you get a net profit of Rs 240cr and an EPS of Rs 13.5-14.
All this will make JLL really attractive!!!
Views on the analysis are invited from fellow members
Regars,
Ranvir Dehal
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