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F a l l i n g r e a l i s a t i o n s t o h u r t e a r n i n g s …
Harrison Malayalam (HM) reported a dismal performance in Q2FY12 with
the topline posting de-growth of 6.7% to | 83.4 crore against | 89.5 crore
in Q2FY11. The decline was largely due to a dip in sales in the tea
segment (~13% YoY) and rubber sales remaining flat YoY. HM’s raw
material cost was significantly lower at 32.3% of net sales against 46.4%
in Q2FY11. However, employee cost during the quarter increased by 450
bps to 41.2% of net sales, thereby keeping margins at the same level as
Q2FY11. The company reported an EBITDA loss of | 1.2 crore during the
quarter. Interest cost and depreciation were at the same levels as the
corresponding quarter last year and there was a tax reversal of | 1.5 crore
during the quarter, thereby reducing the reported loss for the company
from | 6 crore in Q2FY11 to | 4.4 crore in Q2FY12.
ƒ Segmental performance
HM tea sales dipped ~13% YoY to | 30.5 crore against | 35 crore in
Q2FY11. Lower sales from tea were on the back of 18.4% dip in sales
volume from 5.2 million kg (mkg) in Q2FY11 to 4.3 mkg in Q2FY12.
Realisations were higher by 8.3% at ~| 72/kg. However, a higher dip in
sales volume could not be cushioned by the rise in realisations, thereby
impacting segment revenues. Also, losses (PBIT) from tea were higher at
| 13.2 crore vs. | 9.5 crore in the corresponding quarter last year.
Rubber sales volumes for the quarter were lower by 21.6% at 1.9 mkg.
However, realisations were steeply higher by 28.5% to | 242/kg (RSS IV
quality) against | 188.2/kg in Q2FY11. Hence, though sales for the
segment remained flat at | 45.9 crore, profits from the segment were
higher at | 11.2 crore against | 7.7 crore in Q2FY11.
V a l u a t i o n
At the CMP, the stock is trading at 38x and 27.1x its FY12E and FY13E
EPS of | 1.8 and | 2.6, respectively. With rubber prices softening over the
coming quarters and realisation for tea in South India falling to ~| 70/kg,
we expect HM’s sales growth to remain tepid. Also, higher employee and
interest costs could keep margins under pressure. Hence, we have
revised our target price on the stock to | 60, assigning it a SELL rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
F a l l i n g r e a l i s a t i o n s t o h u r t e a r n i n g s …
Harrison Malayalam (HM) reported a dismal performance in Q2FY12 with
the topline posting de-growth of 6.7% to | 83.4 crore against | 89.5 crore
in Q2FY11. The decline was largely due to a dip in sales in the tea
segment (~13% YoY) and rubber sales remaining flat YoY. HM’s raw
material cost was significantly lower at 32.3% of net sales against 46.4%
in Q2FY11. However, employee cost during the quarter increased by 450
bps to 41.2% of net sales, thereby keeping margins at the same level as
Q2FY11. The company reported an EBITDA loss of | 1.2 crore during the
quarter. Interest cost and depreciation were at the same levels as the
corresponding quarter last year and there was a tax reversal of | 1.5 crore
during the quarter, thereby reducing the reported loss for the company
from | 6 crore in Q2FY11 to | 4.4 crore in Q2FY12.
ƒ Segmental performance
HM tea sales dipped ~13% YoY to | 30.5 crore against | 35 crore in
Q2FY11. Lower sales from tea were on the back of 18.4% dip in sales
volume from 5.2 million kg (mkg) in Q2FY11 to 4.3 mkg in Q2FY12.
Realisations were higher by 8.3% at ~| 72/kg. However, a higher dip in
sales volume could not be cushioned by the rise in realisations, thereby
impacting segment revenues. Also, losses (PBIT) from tea were higher at
| 13.2 crore vs. | 9.5 crore in the corresponding quarter last year.
Rubber sales volumes for the quarter were lower by 21.6% at 1.9 mkg.
However, realisations were steeply higher by 28.5% to | 242/kg (RSS IV
quality) against | 188.2/kg in Q2FY11. Hence, though sales for the
segment remained flat at | 45.9 crore, profits from the segment were
higher at | 11.2 crore against | 7.7 crore in Q2FY11.
V a l u a t i o n
At the CMP, the stock is trading at 38x and 27.1x its FY12E and FY13E
EPS of | 1.8 and | 2.6, respectively. With rubber prices softening over the
coming quarters and realisation for tea in South India falling to ~| 70/kg,
we expect HM’s sales growth to remain tepid. Also, higher employee and
interest costs could keep margins under pressure. Hence, we have
revised our target price on the stock to | 60, assigning it a SELL rating.
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