A good 3Q despite rupee fears
Sarin put up a commendable performance in 3Q13 despite challenges such as 1) the rapid depreciation of the Indian rupee against the US dollar, 2) tight credit conditions in the Indian economy and 3) higher rough diamond prices. As warned by the company earlier, sales fell 21.4% qoq and recurring net profit which excludes a one-off tax expense declined by 31.5% qoq. On a yoy basis, recurring net profit growth of 124.4% was driven by a 50% increase in recurring revenue, leading to a margin expansion to 72.6% in 3Q13 (2Q13 - 70.4%, 3Q12 - 63.3%).
One-off tax in 3Q13
As highlighted in its previous announcement, Sarin recorded a US$2.6m additional tax expense in respect of prior period profits in its 3Q13 results.
A lot to look forward to
We believe the worst of the Indian currency crisis is likely over and the operating environment for Indian manufacturers will improve. On prospects, CY14 will see 1) Galaxy Ultra’s commercial 2) Sarin Light will be launched in HK, Taiwan, Korea and the US and 3) Sarin Loupe may also see commercial launch.