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3QSY11 results
While Renuka’s 3QSY11 standalone PAT of Rs472 came ahead, consol EBITDA was
below estimate due to postponing of Brazilian sales volumes. This was more than
offset by large forex gains and consol PAT of Rs1.87bn was above our estimate. On
Brazilian volumes sold, Renuka’s realisations and unit EBITDA came above our
estimate. The company has hedged c.40% of its estimated sugar production for
2013 season at a floor price of 24cents. We are upgrading Renuka’s EPS estimate.
Our target price of Rs75/share is based on a 15% discount to Brazilian peer asset
multiple. Strong core performance from Brazil should remove apprehensions while
balance sheet deleveraging remains a medium term catalyst. Maintain BUY.
3QSY11 standalone profit came above our estimate
While lower than expected refining volumes due to delayed deliveries of raw sugar
because of long waiting periods in Brazilian ports was a disappointment, this was offset
by higher than expected sugar realisations. Moreover, lower than expected power
exports were also more than offset by higher power selling price. This pushed Renuka’s
standalone EBITDA (Rs1.4bn) 7% ahead of our estimate. A 24%QoQ decline in interest
costs allowed standalone PAT (Rs472mn,+430%YoY/+62%QoQ) to beat our estimate.
Consol profit were boosted by large forex gain
However, consolidated EBITDA (Rs4.3bn) came below our estimate due to lower than
expected sales volumes in Brazil (~23% of revised 2012 vols estimate). This was
partially offset by higher sugar equivalent realisation of 26cents/pound (alcohol=
28.5cents, sugar= 23.6 cents). Sugar realisations were bogged down as 30% vols
were sold at 18.8cents as the last tranche of sugar hedged before Renuka’s acquisition.
On volumes sold, unit Brazilian EBIDTA (US$26/ton of cane) came above estimate.
Lower reported EBITDA was more than offset by large forex gains on US$ loans as BRL
gained c.10% in 3Q and this drove a beat on PAT to Rs1.87bn (+107%YoY).
Increasing sugar price forecasts and upgrading estimates
Renuka has hedged c.40% of its expected 2013 sugar production at a floor of
24cents/pound (cap of 30cents). However, weather problems have forced the company
to lower its current season crushing estimate to 10-10.4mt. We lower our 2012
estimate to 10.4mt and also reduce Brazilian power sales volumes but this is more
than offset by increase in our sugar price estimate to 25cents for 2012 and 23 cents
for 2013 from 22cents. We also lower our alcohol and power sales volumes in India
and sugar refining volumes for 4QSY12. Our FY12 EPS estimate rises by a sharp 61%
as we now build in forex gains of the last 2 quarters. EPS for SY13/14 rises by 7/5%.
Maintain BUY (+18%)
Assuming a 15% discount to Brazilian peer asset multiple of US$150/ton of cane
crushing capacity to value Renuka’s Brazilian business and a 7x Ev/EBITDA for non-
Brazilian business, returns Rs75/share as Renuka’s target price. While strong
performance of Brazilian business in 3Q should remove apprehensions, management’s
focus on deleveraging will allow the stock to rerate in medium term. Maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QSY11 results
While Renuka’s 3QSY11 standalone PAT of Rs472 came ahead, consol EBITDA was
below estimate due to postponing of Brazilian sales volumes. This was more than
offset by large forex gains and consol PAT of Rs1.87bn was above our estimate. On
Brazilian volumes sold, Renuka’s realisations and unit EBITDA came above our
estimate. The company has hedged c.40% of its estimated sugar production for
2013 season at a floor price of 24cents. We are upgrading Renuka’s EPS estimate.
Our target price of Rs75/share is based on a 15% discount to Brazilian peer asset
multiple. Strong core performance from Brazil should remove apprehensions while
balance sheet deleveraging remains a medium term catalyst. Maintain BUY.
3QSY11 standalone profit came above our estimate
While lower than expected refining volumes due to delayed deliveries of raw sugar
because of long waiting periods in Brazilian ports was a disappointment, this was offset
by higher than expected sugar realisations. Moreover, lower than expected power
exports were also more than offset by higher power selling price. This pushed Renuka’s
standalone EBITDA (Rs1.4bn) 7% ahead of our estimate. A 24%QoQ decline in interest
costs allowed standalone PAT (Rs472mn,+430%YoY/+62%QoQ) to beat our estimate.
Consol profit were boosted by large forex gain
However, consolidated EBITDA (Rs4.3bn) came below our estimate due to lower than
expected sales volumes in Brazil (~23% of revised 2012 vols estimate). This was
partially offset by higher sugar equivalent realisation of 26cents/pound (alcohol=
28.5cents, sugar= 23.6 cents). Sugar realisations were bogged down as 30% vols
were sold at 18.8cents as the last tranche of sugar hedged before Renuka’s acquisition.
On volumes sold, unit Brazilian EBIDTA (US$26/ton of cane) came above estimate.
Lower reported EBITDA was more than offset by large forex gains on US$ loans as BRL
gained c.10% in 3Q and this drove a beat on PAT to Rs1.87bn (+107%YoY).
Increasing sugar price forecasts and upgrading estimates
Renuka has hedged c.40% of its expected 2013 sugar production at a floor of
24cents/pound (cap of 30cents). However, weather problems have forced the company
to lower its current season crushing estimate to 10-10.4mt. We lower our 2012
estimate to 10.4mt and also reduce Brazilian power sales volumes but this is more
than offset by increase in our sugar price estimate to 25cents for 2012 and 23 cents
for 2013 from 22cents. We also lower our alcohol and power sales volumes in India
and sugar refining volumes for 4QSY12. Our FY12 EPS estimate rises by a sharp 61%
as we now build in forex gains of the last 2 quarters. EPS for SY13/14 rises by 7/5%.
Maintain BUY (+18%)
Assuming a 15% discount to Brazilian peer asset multiple of US$150/ton of cane
crushing capacity to value Renuka’s Brazilian business and a 7x Ev/EBITDA for non-
Brazilian business, returns Rs75/share as Renuka’s target price. While strong
performance of Brazilian business in 3Q should remove apprehensions, management’s
focus on deleveraging will allow the stock to rerate in medium term. Maintain BUY.
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