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UBS Investment Research
EID Parry (India)
Results below estimates
„ EID Q4FY11 PAT up 53.6% YoY, below our estimates
EID Parry (EID) reported Q4FY11 PAT at Rs1.6bn, up 53.6% supported by higher
Cogen and Bio-products results, higher other income (up 32.5% YoY), exceptional
gain of Rs221mn (profit on sale on investments) and deferred tax credit. Preexceptional PAT was up 43.4% YoY. Results disappointed due to higher raw
material costs (higher cane pricing, imported sugar loss of Rs510m). Management
guided Silkroad refinery to improve to 2000MT/day in 3-4 months.
„ Lowering FY12/13 estimates by 9.3/8.0%; upgrading target price
We estimate standalone financials for EID, and assume average cycle normalised
margin assumptions for sugar business. We reduce our FY12/13 estimates by
9.3/8.0%, on higher cane costs and adjusting operational metrics marginally in line
with FY11 numbers and management guidance. Despite this, we upgrade our
SOTP based target price to Rs368/share on our recent upgrade in Coromandel
target price (62.9% stake) and rolling over to FY13 estimates.
„ Attractive SOTP valuation; operational improvements to help YoY growth
We re-iterate Buy as EID looks attractive on SOTP valuation (69.4% value is from
Coromandel). Operational improvements like higher crushing of cane,
cogeneration, distillery production, higher expected power realisation and Silkroad
refinery scale-up are expected to support YoY improvement.
„ Valuation: Maintain Buy on SOTP discount and PT of Rs 368
Our SOTP price target higher to Rs368, which includes Rs255 for its stake in CIL
at 40% holding discount to our fair value.
Key takeaways of conference call
Q Q4FY11 net sales were Rs4.1bn, up 29.3% YoY, on growth in all segments –
sugar, cogen and bio-products. EBITDA at Rs675.6 mn was up 11.8% YoY.
Higher purchase of traded goods costs has limited the YoY growth. Other
income grew 32.5% YoY and finance charges almost remained flat EID
reported an exceptional item of Rs221.4m due to profit on sale of
investments. Tax credit of Rs118.6m in the quarter was due to deferred credit.
PAT at 1.6bn was up 53.6% YoY.
Q Standalone FY11 PAT was down 61.4% YoY, on weaker performance of
sugar division (higher cane price; also adverse weather in Q3FY11 had
impacted crushing of sugarcane and imported sugar loss of Rs510bn). On a
consolidated basis, PAT was lower 20.7% YoY at Rs3.1bn.
Q In FY11, EID standalone crushed 2.83 mn tonnes of cane, at a yield of 8.9%.
Sugar produced was 0.25 mn tonnes, at an average pricing of Rs27/kg. Parry
Sugars and Sadashiva Sugars crushed 1.1 and 0.34 mn tonnes, respectively in
FY11. In Q4FY11, the average sugar realisation was Rs28/kg on the
standalone business. Blended cane cost was Rs2000/tonnes in Q4FY11 and
FY11. Standalone distillery volumes were 2.8 mn litres and average
realisation is Rs30-31/litre. EBIT margin is ~Rs2/litre. Standalone power
production was 450 mn units and consolidated production was 630 mn units.
Q Consolidated operational highlights: In Q4FY11, 2.26 mn tones of cane
were crushed, and in FY11, it was 4.28 mn tonnes. Also, sugar production in
FY11 was 0.42 mn tones, compared to 0.38 lakh tones in FY10. Power
exports in FY11, was 430 mn units, up 30.3% YoY. Blended power cost was
Rs3.7-3.8/unit. Management estimates a 10% growth in production and
potentially higher realisations, due to power shortage in Tamil Nadu. On a
consolidated basis, the distillery volumes were 41.3 mn litres, up 57.6% YoY.
Management highlighted 15-20% growth in distillery volumes.
Q In current sugar season, acreage under sugarcane planting is 103,000 acres.
Management expected 15-20% growth in sugar crushing in FY12.
Consolidated yield improved 0.5% to 9.54% in FY11. Yield is likely to
marginally improve, going forward. Management also guided a moderate
increase in cane prices.
Q Silkroad refinery will take 3-4 months for refining to reach 2,000tonnes/day.
EID exported 22,600 tonnes under ALS obligation.
Q Standalone gross debt as at end FY11 was Rs6.5bn, cash was Rs494mn. On a
consolidated basis, EID reported debt of Rs33.2bn and Rs10.3bn.
Q Interim dividend declared is Rs2/share (face value is Rs1/share).
Q We have included the reported FY11 income statements and balance sheet
numbers in our FY11 estimates. Hence, our FY11 estimates have been
revised. Note, that we have maintained FY11 as estimates, as limited details
are available.
Upgrading SOTP based price target to Rs368/share
We reduce our FY12/13 estimates by 9.3/8.0%, on higher cane costs and
adjusting operational metrics marginally in line with FY11 numbers and
management guidance. Despite this, we upgrade our SOTP based target price to
Rs368/share on our recent upgrade in Coromandel target price (62.9% stake)
and rolling over to FY13 estimates.
Table 2: EID-Parry SOTP target price
FY13 EBITDA for standalone business (Rs mn)# 2,279
FY13 EBITDA for associates/JV business (Rs mn)* 1,799
Total EBITDA of the sugar business (Rs mn) 4,079
Debt in the standalone business (Rs mn) 3,202
Debt in the associates/JV business (Rs mn) 3,242
Total estimated debt in the sugar business (Rs mn) 6,445
Peer EV/EBITDA target multiple (x) 6
EV of the sugar business (Rs mn) 23,656
Investments + cash (Rs mn) 2,346
Estimated equity value of the sugar business (Rs mn) 19,557
No of shares (mn) 173
Equity value per share of sugar business (Rs/share) 113
UBS Coromandel target price (Rs/share) 416
Coromandel current market price (Rs/share) 318
UBS Coromandel equity value (Rs mn) 117,229
EID Parry stake in Coromandel (%) 62.94%
Value of Coromandel stake (Rs mn) 73,784
Holding company discount (%) 40.0%
Value of Coromandel stake, after holding company discount (Rs mn) 44,270
Value of Coromandel stake, after holding company discount (Rs/share) 255
SOTP target price (Rs/share) 368
EID Parry current market price (Rs/share) 234
% upside 57%
Source: Company, UBS research; Note: # This includes contribution from bio-products and nutraceuticals; contribution < 10%; * Silkroad is a 50% JV and likely to be consolidated as income from associates; however for valuation, we include in EBITDA We have
taken proportional share of EBITDA
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
EID Parry (India)
Results below estimates
„ EID Q4FY11 PAT up 53.6% YoY, below our estimates
EID Parry (EID) reported Q4FY11 PAT at Rs1.6bn, up 53.6% supported by higher
Cogen and Bio-products results, higher other income (up 32.5% YoY), exceptional
gain of Rs221mn (profit on sale on investments) and deferred tax credit. Preexceptional PAT was up 43.4% YoY. Results disappointed due to higher raw
material costs (higher cane pricing, imported sugar loss of Rs510m). Management
guided Silkroad refinery to improve to 2000MT/day in 3-4 months.
„ Lowering FY12/13 estimates by 9.3/8.0%; upgrading target price
We estimate standalone financials for EID, and assume average cycle normalised
margin assumptions for sugar business. We reduce our FY12/13 estimates by
9.3/8.0%, on higher cane costs and adjusting operational metrics marginally in line
with FY11 numbers and management guidance. Despite this, we upgrade our
SOTP based target price to Rs368/share on our recent upgrade in Coromandel
target price (62.9% stake) and rolling over to FY13 estimates.
„ Attractive SOTP valuation; operational improvements to help YoY growth
We re-iterate Buy as EID looks attractive on SOTP valuation (69.4% value is from
Coromandel). Operational improvements like higher crushing of cane,
cogeneration, distillery production, higher expected power realisation and Silkroad
refinery scale-up are expected to support YoY improvement.
„ Valuation: Maintain Buy on SOTP discount and PT of Rs 368
Our SOTP price target higher to Rs368, which includes Rs255 for its stake in CIL
at 40% holding discount to our fair value.
Key takeaways of conference call
Q Q4FY11 net sales were Rs4.1bn, up 29.3% YoY, on growth in all segments –
sugar, cogen and bio-products. EBITDA at Rs675.6 mn was up 11.8% YoY.
Higher purchase of traded goods costs has limited the YoY growth. Other
income grew 32.5% YoY and finance charges almost remained flat EID
reported an exceptional item of Rs221.4m due to profit on sale of
investments. Tax credit of Rs118.6m in the quarter was due to deferred credit.
PAT at 1.6bn was up 53.6% YoY.
Q Standalone FY11 PAT was down 61.4% YoY, on weaker performance of
sugar division (higher cane price; also adverse weather in Q3FY11 had
impacted crushing of sugarcane and imported sugar loss of Rs510bn). On a
consolidated basis, PAT was lower 20.7% YoY at Rs3.1bn.
Q In FY11, EID standalone crushed 2.83 mn tonnes of cane, at a yield of 8.9%.
Sugar produced was 0.25 mn tonnes, at an average pricing of Rs27/kg. Parry
Sugars and Sadashiva Sugars crushed 1.1 and 0.34 mn tonnes, respectively in
FY11. In Q4FY11, the average sugar realisation was Rs28/kg on the
standalone business. Blended cane cost was Rs2000/tonnes in Q4FY11 and
FY11. Standalone distillery volumes were 2.8 mn litres and average
realisation is Rs30-31/litre. EBIT margin is ~Rs2/litre. Standalone power
production was 450 mn units and consolidated production was 630 mn units.
Q Consolidated operational highlights: In Q4FY11, 2.26 mn tones of cane
were crushed, and in FY11, it was 4.28 mn tonnes. Also, sugar production in
FY11 was 0.42 mn tones, compared to 0.38 lakh tones in FY10. Power
exports in FY11, was 430 mn units, up 30.3% YoY. Blended power cost was
Rs3.7-3.8/unit. Management estimates a 10% growth in production and
potentially higher realisations, due to power shortage in Tamil Nadu. On a
consolidated basis, the distillery volumes were 41.3 mn litres, up 57.6% YoY.
Management highlighted 15-20% growth in distillery volumes.
Q In current sugar season, acreage under sugarcane planting is 103,000 acres.
Management expected 15-20% growth in sugar crushing in FY12.
Consolidated yield improved 0.5% to 9.54% in FY11. Yield is likely to
marginally improve, going forward. Management also guided a moderate
increase in cane prices.
Q Silkroad refinery will take 3-4 months for refining to reach 2,000tonnes/day.
EID exported 22,600 tonnes under ALS obligation.
Q Standalone gross debt as at end FY11 was Rs6.5bn, cash was Rs494mn. On a
consolidated basis, EID reported debt of Rs33.2bn and Rs10.3bn.
Q Interim dividend declared is Rs2/share (face value is Rs1/share).
Q We have included the reported FY11 income statements and balance sheet
numbers in our FY11 estimates. Hence, our FY11 estimates have been
revised. Note, that we have maintained FY11 as estimates, as limited details
are available.
Upgrading SOTP based price target to Rs368/share
We reduce our FY12/13 estimates by 9.3/8.0%, on higher cane costs and
adjusting operational metrics marginally in line with FY11 numbers and
management guidance. Despite this, we upgrade our SOTP based target price to
Rs368/share on our recent upgrade in Coromandel target price (62.9% stake)
and rolling over to FY13 estimates.
Table 2: EID-Parry SOTP target price
FY13 EBITDA for standalone business (Rs mn)# 2,279
FY13 EBITDA for associates/JV business (Rs mn)* 1,799
Total EBITDA of the sugar business (Rs mn) 4,079
Debt in the standalone business (Rs mn) 3,202
Debt in the associates/JV business (Rs mn) 3,242
Total estimated debt in the sugar business (Rs mn) 6,445
Peer EV/EBITDA target multiple (x) 6
EV of the sugar business (Rs mn) 23,656
Investments + cash (Rs mn) 2,346
Estimated equity value of the sugar business (Rs mn) 19,557
No of shares (mn) 173
Equity value per share of sugar business (Rs/share) 113
UBS Coromandel target price (Rs/share) 416
Coromandel current market price (Rs/share) 318
UBS Coromandel equity value (Rs mn) 117,229
EID Parry stake in Coromandel (%) 62.94%
Value of Coromandel stake (Rs mn) 73,784
Holding company discount (%) 40.0%
Value of Coromandel stake, after holding company discount (Rs mn) 44,270
Value of Coromandel stake, after holding company discount (Rs/share) 255
SOTP target price (Rs/share) 368
EID Parry current market price (Rs/share) 234
% upside 57%
Source: Company, UBS research; Note: # This includes contribution from bio-products and nutraceuticals; contribution < 10%; * Silkroad is a 50% JV and likely to be consolidated as income from associates; however for valuation, we include in EBITDA We have
taken proportional share of EBITDA
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