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Tea
Lower production, higher realisation to augur well for industry
Tea production in India has remained stagnant in the range of ~960-
980 million kg (2006-10) and is likely to remain at ~980-1000 million
kg in 2011 (mere increase of 2-3%). In Q4FY11, tea companies are
likely to post better results compare to Q4FY10 with the losses
contained due to higher realizations for the low quality or dust tea,
which is being traded between Jan-Mar. We believe tea prices will
remain buoyant in 2011 on the back of high export demand for
Indian tea. This has been reflected by the first trades (starts with the
5th April, 2011) as quality tea fetched 29% higher prices while the
average quality rose by 15%. Average crush, tear and curl (CTC) tea
garnered | 150-160 per kg against | 130-140 per kg in Q4FY10.
Global outlook continues to remain positive for tea companies
Tea production in Kenya declined ~14% in Jan-Feb, 2011 impacting
the volumes exported that dropped to 32.2 million kg in February
2011 compared to 37.5 million kg in the corresponding period. This
can also be attributed to less shipment to Egypt during the first two
weeks of the month owing to political unrest in the country.
Simultaneously, tea production in Sri Lanka has declined by ~18%
during Jan-Feb 2011 to 42.6 million kg. Higher global prices have
resulted in increase in exports and higher export realisations for the
Indian companies, which in turn would help in reducing the losses in
Jan-Mar quarter. This period remains an off-season as production
halts and only low and dust quality tea is being sold. We believe
production in Kenya and Sri Lanka (major tea exporting countries)
would remain 16% lower in 2011 compared to the bumper crop in
2010. The average price of Kenya’s top grade tea is trading at $3.5
per kg in April 2011 compared to $3.0 per kg in January 2011 and is
likely to remain firm for the rest of the year.
Company specific view
Company Remarks
Harrison
Malayalam
The company is likely to witness sales volume of 3.8 million kg of tea with average
realisation of | 71 per kg and 3,000 tonnes of rubber sales with average realisation of |
192 per kg. We believe higher earnings led by increasing rubber prices would set-off
losses from the tea business in Q4FY11
Jayshree
Tea
We expect the company to sell 4.5 million kg of tea with average realisation of | 118
per kg. With increasing global prices, export realisations for North Indian tea companies
have firmed up YoY. However, with January-March being an off-season for the industry,
most companies are likely to post losses
McLeod
Russel
We estimate sales of 25 million kg at average prices of | 123.1/kg. Considering tea
prices in North India were | 5-8/kg higher than the corresponding quarter, net losses
would be contained at | 91 crore compared to | 123 crore in the previous year. Q4
being an off season, only dust quality tea has been sold
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tea
Lower production, higher realisation to augur well for industry
Tea production in India has remained stagnant in the range of ~960-
980 million kg (2006-10) and is likely to remain at ~980-1000 million
kg in 2011 (mere increase of 2-3%). In Q4FY11, tea companies are
likely to post better results compare to Q4FY10 with the losses
contained due to higher realizations for the low quality or dust tea,
which is being traded between Jan-Mar. We believe tea prices will
remain buoyant in 2011 on the back of high export demand for
Indian tea. This has been reflected by the first trades (starts with the
5th April, 2011) as quality tea fetched 29% higher prices while the
average quality rose by 15%. Average crush, tear and curl (CTC) tea
garnered | 150-160 per kg against | 130-140 per kg in Q4FY10.
Global outlook continues to remain positive for tea companies
Tea production in Kenya declined ~14% in Jan-Feb, 2011 impacting
the volumes exported that dropped to 32.2 million kg in February
2011 compared to 37.5 million kg in the corresponding period. This
can also be attributed to less shipment to Egypt during the first two
weeks of the month owing to political unrest in the country.
Simultaneously, tea production in Sri Lanka has declined by ~18%
during Jan-Feb 2011 to 42.6 million kg. Higher global prices have
resulted in increase in exports and higher export realisations for the
Indian companies, which in turn would help in reducing the losses in
Jan-Mar quarter. This period remains an off-season as production
halts and only low and dust quality tea is being sold. We believe
production in Kenya and Sri Lanka (major tea exporting countries)
would remain 16% lower in 2011 compared to the bumper crop in
2010. The average price of Kenya’s top grade tea is trading at $3.5
per kg in April 2011 compared to $3.0 per kg in January 2011 and is
likely to remain firm for the rest of the year.
Company specific view
Company Remarks
Harrison
Malayalam
The company is likely to witness sales volume of 3.8 million kg of tea with average
realisation of | 71 per kg and 3,000 tonnes of rubber sales with average realisation of |
192 per kg. We believe higher earnings led by increasing rubber prices would set-off
losses from the tea business in Q4FY11
Jayshree
Tea
We expect the company to sell 4.5 million kg of tea with average realisation of | 118
per kg. With increasing global prices, export realisations for North Indian tea companies
have firmed up YoY. However, with January-March being an off-season for the industry,
most companies are likely to post losses
McLeod
Russel
We estimate sales of 25 million kg at average prices of | 123.1/kg. Considering tea
prices in North India were | 5-8/kg higher than the corresponding quarter, net losses
would be contained at | 91 crore compared to | 123 crore in the previous year. Q4
being an off season, only dust quality tea has been sold
Source: Company, ICICIdirect.com Research
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