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H i g h e r p r i c e s d r i v e p r o f i t a b i l i t y …
McLeod Russel reported its Q2FY12 results. The topline grew by 12.3%
YoY to | 405.7 crore led by an increase in both sales volume and prices.
During the quarter, the company’s sales volumes were higher by 2.3
million kg (mkg) and realisations by ~| 6/kg. Employee cost in Q2FY12
witnessed a slight moderation and stood at 29.1% of net sales compared
to 29.9% in Q2FY11. In spite of a dip in employee costs, marginal
increases in power and fuel cost, freight and other manufacturing
expenses kept the EBITDA margin at the same level of 58.2% in Q2FY12.
Hence, higher sales and sustained margins helped the profitability to
increase by 9.8% YoY to | 223.2 crore against | 203.2 crore in Q1FY12.
ƒ Operational highlights
The company’s total tea production during the quarter was 36.8 mkg
against 32.9 mkg in Q2FY11. Tea sales volume in Q2FY12 stood at 26.2
mkg against 23.9 mkg in the corresponding quarter last year. Realisation
per kg was also higher by | 5.98/kg and stood at | 157.6/kg.
ƒ Tea production and prices outlook
Tea production in India is expected to be higher this year (FY12) at ~1000
mkg against ~965 mkg in FY11. The increase in production is expected
on the back of increased plantation in North India due to favourable
weather conditions. Hence, a higher production in the country, lower
inventory levels and a strong consumption growth (both domestic and
international) have led tea prices to increase by ~|10/kg during the year.
Further, with the major tea exporting country, Kenya, experiencing a
shortfall (~37 mkg till September, 2011) in production during the year, we
expect higher tea prices to remain sustainable.
V a l u a t i o n
At the CMP, the stock is trading 9x and 8.6x its FY12E and FY13E EPS of |
27.3 and | 28.8, respectively. McLeod being one of the largest tea
producers and exporters of the country and with tea prices trending
higher backed by a strong demand growth, we expect the growth in
revenues and earnings to remain healthy, going ahead. We have valued
the stock at 11x its FY13E EPS and assigned it a target price of | 305
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r p r i c e s d r i v e p r o f i t a b i l i t y …
McLeod Russel reported its Q2FY12 results. The topline grew by 12.3%
YoY to | 405.7 crore led by an increase in both sales volume and prices.
During the quarter, the company’s sales volumes were higher by 2.3
million kg (mkg) and realisations by ~| 6/kg. Employee cost in Q2FY12
witnessed a slight moderation and stood at 29.1% of net sales compared
to 29.9% in Q2FY11. In spite of a dip in employee costs, marginal
increases in power and fuel cost, freight and other manufacturing
expenses kept the EBITDA margin at the same level of 58.2% in Q2FY12.
Hence, higher sales and sustained margins helped the profitability to
increase by 9.8% YoY to | 223.2 crore against | 203.2 crore in Q1FY12.
ƒ Operational highlights
The company’s total tea production during the quarter was 36.8 mkg
against 32.9 mkg in Q2FY11. Tea sales volume in Q2FY12 stood at 26.2
mkg against 23.9 mkg in the corresponding quarter last year. Realisation
per kg was also higher by | 5.98/kg and stood at | 157.6/kg.
ƒ Tea production and prices outlook
Tea production in India is expected to be higher this year (FY12) at ~1000
mkg against ~965 mkg in FY11. The increase in production is expected
on the back of increased plantation in North India due to favourable
weather conditions. Hence, a higher production in the country, lower
inventory levels and a strong consumption growth (both domestic and
international) have led tea prices to increase by ~|10/kg during the year.
Further, with the major tea exporting country, Kenya, experiencing a
shortfall (~37 mkg till September, 2011) in production during the year, we
expect higher tea prices to remain sustainable.
V a l u a t i o n
At the CMP, the stock is trading 9x and 8.6x its FY12E and FY13E EPS of |
27.3 and | 28.8, respectively. McLeod being one of the largest tea
producers and exporters of the country and with tea prices trending
higher backed by a strong demand growth, we expect the growth in
revenues and earnings to remain healthy, going ahead. We have valued
the stock at 11x its FY13E EPS and assigned it a target price of | 305
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