Execution issues galore; Cut estimates and PO
Our interactions with company suggest that it is facing problems in scaling up.
Led by expected delay in increase in capacity utilizations, we cut estimates by
over 20% and reduce PO to INR74 (earlier PO INR90). PO is pegged at 10xFY12
PE and 2yr PEG of 0.4x which is at a lower end of 0.4x to 0.6x range for our mid
cap coverage. Retain Buy given lower valuations.
Procurement problems to slow market share gains
Over the last four years KS Oils emerged as the leader in mustard oil segment
quadrupling market share to 11%. However, we believe the company is now
facing difficulties in procurement given size. While the company is investing in
strengthening and broad-basing procurement, we believe increase in capacity
utilization in new facilities will likely be delayed and hence impact earning growth.
Indonesia palm plantations scale up delayed marginally
As per the company, it has planted ~750ha with palm and targets to cross 4000ha
by March-11 vs earlier target of over 7000ha. Planting is delayed due to weather
related issues. Company also plans to cover its licensed 54,000ha before
acquiring
No comments:
Post a Comment