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Harrisons Malayalam - Higher realisations to drive growth…
Harrison Malayalam’s Q3FY11 results were in line with our
expectations. The topline grew ~13% to | 94.3 crore in line with our
expectation of | 95.5 crore. The margins, however, dipped considerably
by 537 bps to 8.3% against 13.7% in Q3FY10. Margins dipped on
account of higher raw material prices (higher by ~200 bps) and
manufacturing costs. Interest cost for the quarter was, however, lower
at | 1.7 crore against | 3.3 crore in the corresponding quarter last year.
Despite the lower interest cost, earnings of the company witnessed a
dip due to the hit on EBITDA margins. Hence, the company’s bottomline
stood at | 5.6 crore in Q3FY11 against | 6.4 crore in Q3FY10.
Operational Highlights
The company’s tea sales (by volume) were higher by ~6% at 45
million kg in Q3FY11. However, the realisation from tea dipped
~18% to | 73.4/kg on the back of higher tea production in South
India in 2010. The volume of rubber sales was lower by ~20% at
2591 metric tonnes (MT) in Q3FY11 with realisations increasing
drastically to around | 194/kg. The realisation from rubber was
higher on account of the supply-demand mismatch of the
commodity in both the domestic and international markets.
Valuation
At the CMP of | 67, the stock is trading at 9.6x its FY12E EPS of | 7. With
the outlook for both tea and rubber prices being positive, led by the
increasing demand and constricted production, we believe the company’s
realisations would continue to grow at a moderate pace. Hence, we have
valued the stock at 10x its FY12 estimated EPS of | 7 and arrived at a
target price of |73. We have upgraded our rating from SELL to ADD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Harrisons Malayalam - Higher realisations to drive growth…
Harrison Malayalam’s Q3FY11 results were in line with our
expectations. The topline grew ~13% to | 94.3 crore in line with our
expectation of | 95.5 crore. The margins, however, dipped considerably
by 537 bps to 8.3% against 13.7% in Q3FY10. Margins dipped on
account of higher raw material prices (higher by ~200 bps) and
manufacturing costs. Interest cost for the quarter was, however, lower
at | 1.7 crore against | 3.3 crore in the corresponding quarter last year.
Despite the lower interest cost, earnings of the company witnessed a
dip due to the hit on EBITDA margins. Hence, the company’s bottomline
stood at | 5.6 crore in Q3FY11 against | 6.4 crore in Q3FY10.
Operational Highlights
The company’s tea sales (by volume) were higher by ~6% at 45
million kg in Q3FY11. However, the realisation from tea dipped
~18% to | 73.4/kg on the back of higher tea production in South
India in 2010. The volume of rubber sales was lower by ~20% at
2591 metric tonnes (MT) in Q3FY11 with realisations increasing
drastically to around | 194/kg. The realisation from rubber was
higher on account of the supply-demand mismatch of the
commodity in both the domestic and international markets.
Valuation
At the CMP of | 67, the stock is trading at 9.6x its FY12E EPS of | 7. With
the outlook for both tea and rubber prices being positive, led by the
increasing demand and constricted production, we believe the company’s
realisations would continue to grow at a moderate pace. Hence, we have
valued the stock at 10x its FY12 estimated EPS of | 7 and arrived at a
target price of |73. We have upgraded our rating from SELL to ADD.
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