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USHER AGRO
Growth on track
Revenue slightly above estimate; PAT in line
Usher Agro (Usher) posted strong revenue growth of 60% Y-o-Y (19.4% Q-o-Q)
to INR 1,367 mn in Q2FY11, slightly ahead of our estimate. EBIDTA jumped
36.7% Y-o-Y. Strong revenue growth was owing to robust sales volume, coupled
with higher rice realisation. Export sales increased significantly to INR 196.9 mn,
Q-o-Q growth of ~110% (there were no export sales in Q2FY10). Net profit came
in line with estimate at INR 89 mn, up 32.3% Y-o-Y. EBIDTA margin during the
quarter was lower ~200bps Y-o-Y on account of higher raw material costs.
Raised INR 1 bn through QIP for capex and working capital requirements
The company has raised capital of ~INR 1 bn through the QIP route, which is
expected to be utilised for capex as well as to fund the increasing working capital
needs on account of scaling up of capacities. Out of this amount, ~INR 0.6 bn is
expected to be used for expansion of rice processing capacity by 50,000 MT, wheat
processing capacity by 50,000 MT, construction of silos, and also to set up a 1 MW
power plant in Buxar to meet the company’s power requirements. The balance
INR 0.4 bn is expected to be used for funding working capital requirements.
Commercial production from new rice plant from March 2011
The 291,600 MT rice milling capacity addition is on stream, but commercial
production, which was expected to start in January 2011, has been delayed to
March 2011. With this new plant, Usher’s total rice processing capacity will touch
543,600 MT. As we have already factored in a possible delay of commercial
production from this plant, we maintain our estimates for the company.
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 93, the company is available at 5.7x and 5.2x consolidated P/E and at 4.7x and
4.0x consolidated EV/EBITDA of FY12E and FY13E, respectively. We maintain ‘BUY’
recommendation on the stock.
Company Description
Usher, promoted by Mr. Vinod Chaturvedi in June 1996, is a processor of rice and wheat,
with an installed capacity of 252,600 MT and 75,000 MT, respectively. Its manufacturing
facilities are located at Buxar (Bihar), Mathura (Uttar Pradesh) and Chhata (Uttar
Pradesh). The company produces FCI grade rice as well as premium quality non-basmati
rice like Pusa, Son Massori, Sonam etc, along with some basmati rice. Wheat division of
Usher supplies to organised players like Britannia, Parle, Nestle etc. Usher sells its
products under the brand name of ‘Rasoi Raaja’. It targets to become the largest rice
processing company in India over the next few years by enhancing its rice processing
capacities further.
Investment Theme
On the back of scaling up of capacities by more than doubling its rice processing
capacity, we expect Usher’s revenue and profitability to zoom at a CAGR of 62% and
61%, respectively, over FY10–12E. Rice processing is a highly-fragmented industry in
India with no significant increase in rice milling capacities in the past few years. This
provides lot of scope for organised players like Usher to scale up capacities and utilise
the by-products to manufacture value added products, thus enhancing profitability. With
its manufacturing plants located starategically in the states of Uttar Pradesh and Bihar –
part of grain belt of India – Usher has significant competitive advantage in terms of raw
material procurement for its enhanced capacities. With Usher venturing into husk-based
power, it would be attaining higher integration. We expect operating margin expansion
for the company.
Key Risks
Delay in execution
Any delay in expansion of the rice capacity could risk earnings.
Regulatory changes
FCI accounts for over 30% of the rice sales value for Usher. Any issues related to offtake
by FCI will affect Usher‘s revenues as well as profitability.
Price risk in non-FCI rice and wheat segments
Usher procures paddy and wheat only in few months of a year and sells processed
products throughout the year. This introduces the element of pricing risk, in case prices
come off for the end products.
Currency fluctuation
INR volatility may impact export revenues of premium rice as well as margins.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
USHER AGRO
Growth on track
Revenue slightly above estimate; PAT in line
Usher Agro (Usher) posted strong revenue growth of 60% Y-o-Y (19.4% Q-o-Q)
to INR 1,367 mn in Q2FY11, slightly ahead of our estimate. EBIDTA jumped
36.7% Y-o-Y. Strong revenue growth was owing to robust sales volume, coupled
with higher rice realisation. Export sales increased significantly to INR 196.9 mn,
Q-o-Q growth of ~110% (there were no export sales in Q2FY10). Net profit came
in line with estimate at INR 89 mn, up 32.3% Y-o-Y. EBIDTA margin during the
quarter was lower ~200bps Y-o-Y on account of higher raw material costs.
Raised INR 1 bn through QIP for capex and working capital requirements
The company has raised capital of ~INR 1 bn through the QIP route, which is
expected to be utilised for capex as well as to fund the increasing working capital
needs on account of scaling up of capacities. Out of this amount, ~INR 0.6 bn is
expected to be used for expansion of rice processing capacity by 50,000 MT, wheat
processing capacity by 50,000 MT, construction of silos, and also to set up a 1 MW
power plant in Buxar to meet the company’s power requirements. The balance
INR 0.4 bn is expected to be used for funding working capital requirements.
Commercial production from new rice plant from March 2011
The 291,600 MT rice milling capacity addition is on stream, but commercial
production, which was expected to start in January 2011, has been delayed to
March 2011. With this new plant, Usher’s total rice processing capacity will touch
543,600 MT. As we have already factored in a possible delay of commercial
production from this plant, we maintain our estimates for the company.
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 93, the company is available at 5.7x and 5.2x consolidated P/E and at 4.7x and
4.0x consolidated EV/EBITDA of FY12E and FY13E, respectively. We maintain ‘BUY’
recommendation on the stock.
Company Description
Usher, promoted by Mr. Vinod Chaturvedi in June 1996, is a processor of rice and wheat,
with an installed capacity of 252,600 MT and 75,000 MT, respectively. Its manufacturing
facilities are located at Buxar (Bihar), Mathura (Uttar Pradesh) and Chhata (Uttar
Pradesh). The company produces FCI grade rice as well as premium quality non-basmati
rice like Pusa, Son Massori, Sonam etc, along with some basmati rice. Wheat division of
Usher supplies to organised players like Britannia, Parle, Nestle etc. Usher sells its
products under the brand name of ‘Rasoi Raaja’. It targets to become the largest rice
processing company in India over the next few years by enhancing its rice processing
capacities further.
Investment Theme
On the back of scaling up of capacities by more than doubling its rice processing
capacity, we expect Usher’s revenue and profitability to zoom at a CAGR of 62% and
61%, respectively, over FY10–12E. Rice processing is a highly-fragmented industry in
India with no significant increase in rice milling capacities in the past few years. This
provides lot of scope for organised players like Usher to scale up capacities and utilise
the by-products to manufacture value added products, thus enhancing profitability. With
its manufacturing plants located starategically in the states of Uttar Pradesh and Bihar –
part of grain belt of India – Usher has significant competitive advantage in terms of raw
material procurement for its enhanced capacities. With Usher venturing into husk-based
power, it would be attaining higher integration. We expect operating margin expansion
for the company.
Key Risks
Delay in execution
Any delay in expansion of the rice capacity could risk earnings.
Regulatory changes
FCI accounts for over 30% of the rice sales value for Usher. Any issues related to offtake
by FCI will affect Usher‘s revenues as well as profitability.
Price risk in non-FCI rice and wheat segments
Usher procures paddy and wheat only in few months of a year and sells processed
products throughout the year. This introduces the element of pricing risk, in case prices
come off for the end products.
Currency fluctuation
INR volatility may impact export revenues of premium rice as well as margins.
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