This stock is paying a massive dividend of 8500%. Buy post Q2 results?

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A large-cap business with a market valuation of 27,447.34 Cr, 3M India is an Indian unit of a US-based 3M Company. It operates in a diversified industry. The corporation would distribute to its shareholders a massive 8500% dividend at a face value of 10 per share or 850 per share. On November 9, the company’s board decided that November 22 would serve as the record date for assessing the shareholders’ eligibility to receive the interim dividend. The ex-dividend date for 3M shares is November 21, which is a working day prior to the record date.

The company has said in a stock exchange filing that “The Board of Directors declared Interim (Special) Dividend of Rs.850/- per Share on 1,12,65,070 Nos. of Equity Shares of Rs. 10/- each (F.V.) for the financial year 2022-23. The Company has fixed Tuesday, the 22nd November, 2022, as the “Record Date” for the purpose of ascertaining the eligibility of the Shareholders for payment of Interim Dividend.”

The interim dividend shall be paid/dispatched to the shareholders on or before December 9, 2022, said the Board of Directors of 3M India Ltd.

On a standalone basis, the company recorded net sales of 925 Cr in Q2FY23 compared to 777 Cr posted in Q2FY22, representing a YoY growth of 19%. The company reported an EBITDA of 149 Cr in Q2FY23 compared to 101 Cr posted in Q2FY22, representing a YoY gain of 48%. The company reported a net profit of 100 Cr in Q2FY23 compared to 65 Cr posted in Q2FY22, representing a YoY growth of 54%.

On a consolidated basis, the company declared net sales of 977 Cr in Q2FY23 compared to 840 Cr posted in Q2FY22, representing a YoY growth of 16%. 3M India posted an EBITDA of 158 Cr in Q2FY23 compared to 101 Cr posted in Q2FY22, representing a YoY gain of 56%. The company’s net profit jumped 66% YoY from 64 Cr posted in the quarter ended September 2021 to 106 Cr recorded in the quarter ended September 2022.

Commenting on the consolidated quarterly and half yearly results ended September 30, 2022 Mr. Ramesh Ramadurai, Managing Director of 3M India Limited, said “On a consolidated basis, the Company delivered 16.3% sales growth versus prior year, and a 3.5% sales growth on a sequential basis. Transportation & Electronic segment led the growth at nearly 28% versus prior year. Our teams continued to execute multiple actions to mitigate the impact of cost headwinds and supply chain challenges. The external conditions remain uncertain and the Company is diligently monitoring the situation by staying in close contact with customers and supply partners. I would like to thank all of our stakeholders for their support to our Company in another difficult year. I would also like to recognize our employees for their strong and dedicated efforts to serve our customers, and for keeping their morale high under challenging circumstances.”

Post the dividend declaration of 3M India, the research analysts of the broking firm ICICI Securities said “3M India has announced its first-ever dividend (Rs850/share), which is the key highlight of Q2FY23 result. The payout will result in cash outflow of Rs9.75bn, but the company still has enough cash on books (~Rs4bn) to invest in any large capex. It also generates OCF > Rs3bn each year. Revenue of 3M grew 16.3% YoY, led by strong numbers across all segments. Amidst input material inflation, supply-chain challenges and INR depreciation, timely price hikes and other costsaving initiatives helped 3M India expand EBITDA margin by 161bps YoY.”

“We remain positive on 3M India led by competitive advantages like (1) strong brands, (2) established distribution network and global relationships with large manufacturers, and (3) access to parent’s technology pool. We model 3M India to report revenue and PAT CAGRs of 18.1% and 36.6% over FY22-24E, respectively. Maintain BUY with a revised DCF-based TP of Rs27,400 (implied P/E 61x of FY24E EPS; earlier TP-Rs26,500),” they further added.

The shares of 3M India Ltd closed on Friday at 24,260.00 apiece, up 1.06% from the previous close of 24,004.75. During its last trading session, the stock recorded a total volume of 3,550 shares compared to the 20-Day average volume of 4,309 shares. On a YTD basis, the stock has fallen 5.96% so far in 2022.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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