USHER AGRO Strong growth continues:Edelweiss

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􀂄 Revenue and PAT above estimates
Usher Agro (Usher) posted strong revenue growth of 63% Y-o-Y (19.3% Q-o-Q),
at INR 1,145 mn, ahead of our estimates. EBIDTA was up 58.1% Y-o-Y in
Q1FY11. Strong revenue growth was owing to robust sales volume, coupled with
higher realisation of rice. Rice accounted for ~80% of the revenue, at ~INR 950
mn in Q1FY11 (inclusive of INR 93.6 mn revenue from exports); wheat products
accounted for the remaining. Net profit was ahead of estimates, at INR 81 mn, up
47.2% Y-o-Y, predominantly due to the positive surprise on revenues. EBIDTA
margin in Q1FY11 was marginally lower at 13.6% vis-à-vis 14% in Q1FY10.


􀂄 New rice processing capacity to commercialise from January 2011
The 291,600 MT rice milling capacity addition is on stream, to be commissioned by
December 2010; commercial production is expected to start in January 2011. With
this, the total rice processing capacity of Usher would reach 543,600 MT. The new
plant is expected to have six months of operations in FY11 and would be adding
significant amount of growth to the company for H2FY11.

􀂄 Strong outlook on rice exports
On account of good monsoons in India, the production estimates are robust at ~102
mn MT for FY11 vis-à-vis ~89 mn MT in FY10. Moreover, owing to recent floods in
Pakistan and Thailand (India’s major competitors in the global premium rice export
market), their rice production is hit. Consequently, rice prices have firmed up
globally, auguring well for India. Also, GoI is expected to remove the two-year ban
on non-basmati exports, which will benefit the Indian rice processing companies.
Usher targets to have export revenues of ~INR 750–1,000 mn in FY11.

􀂄 Outlook and valuations: Attractive; maintain ‘BUY’
With the new rice capacity about to be commissioned, we see good earnings
visibility over the next few quarters and remain positive on the company. At CMP of
INR 90, the company is available at 7.1x and 4.2x consolidated P/E and at 6.0x and
4.5x consolidated EV/EBITDA of FY11E and FY12E, respectively. We maintain ‘BUY’
on the stock, with a target price INR 131 per share, based on 6x FY12E P/E.