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E a r n i n g s l o w e r t h a n e x p e c t a t i o n s …
McLeod Russel’s Q3FY12 results were below our estimates as net sales
witnessed 7.4% growth to | 393.7 crore vs. | 366.7 crore in Q3FY11. The
growth has been led by 4.4% increase in volume and 2.4% price rise.
EBITDA margins declined sharply to 34% from 40.4% in Q3FY11 due to
increase in raw material cost as higher production led to increase in
inventory levels at the end of December quarter. Interest cost increased
by 57.4% to | 9.4 crore due to high interest rates. The company incurred
a mark-to-market forex loss of | 4.4 crore as it entered into forward
contracts for some of the quantities sold. Increase in raw material cost
and other operating expenses led to the decline in net profit from | 135.3
crore in Q3FY11 to | 117.1 crore in Q3FY12.
ƒ Operational highlights
The company’s total tea production during the quarter was 19.7 million kg
against 21.8 million kg in Q3FY11. Tea sales volumes in Q3FY12 were at
25.6 million kg at an average realisations of | 152.9/kg as against 24.5
million kg with average realisation of 149.3/kg. Out of the total quantity
sold, the company has sold 16.1 million kg in India with average
realisation of |143.3/kg while 9.5 million kg has been sold at average
realisation of | 171.7/kg.
V a l u a t i o n
At the CMP, the stock is trading 7.8x and 6.7x its FY12E and FY13E EPS of
| 25.1 and | 28.8, respectively. Though domestic tea prices have come off
from their peak in June-July 2011 export prices have been continuously
strong. Considering the March quarter is generally a weak quarter, losses
would remain high in Q4FY12 due to higher levels of inventory of dust
tea. We believe tea prices would remain stable in FY13, so the growth for
the company would only contributed by higher volumes. Considering flat
tea prices in FY13, margins for the company would remain under
pressure but volumes will witness steady growth. We have valued the
stock at 9x its FY13E EPS and assigned it a target price of | 260.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E a r n i n g s l o w e r t h a n e x p e c t a t i o n s …
McLeod Russel’s Q3FY12 results were below our estimates as net sales
witnessed 7.4% growth to | 393.7 crore vs. | 366.7 crore in Q3FY11. The
growth has been led by 4.4% increase in volume and 2.4% price rise.
EBITDA margins declined sharply to 34% from 40.4% in Q3FY11 due to
increase in raw material cost as higher production led to increase in
inventory levels at the end of December quarter. Interest cost increased
by 57.4% to | 9.4 crore due to high interest rates. The company incurred
a mark-to-market forex loss of | 4.4 crore as it entered into forward
contracts for some of the quantities sold. Increase in raw material cost
and other operating expenses led to the decline in net profit from | 135.3
crore in Q3FY11 to | 117.1 crore in Q3FY12.
ƒ Operational highlights
The company’s total tea production during the quarter was 19.7 million kg
against 21.8 million kg in Q3FY11. Tea sales volumes in Q3FY12 were at
25.6 million kg at an average realisations of | 152.9/kg as against 24.5
million kg with average realisation of 149.3/kg. Out of the total quantity
sold, the company has sold 16.1 million kg in India with average
realisation of |143.3/kg while 9.5 million kg has been sold at average
realisation of | 171.7/kg.
V a l u a t i o n
At the CMP, the stock is trading 7.8x and 6.7x its FY12E and FY13E EPS of
| 25.1 and | 28.8, respectively. Though domestic tea prices have come off
from their peak in June-July 2011 export prices have been continuously
strong. Considering the March quarter is generally a weak quarter, losses
would remain high in Q4FY12 due to higher levels of inventory of dust
tea. We believe tea prices would remain stable in FY13, so the growth for
the company would only contributed by higher volumes. Considering flat
tea prices in FY13, margins for the company would remain under
pressure but volumes will witness steady growth. We have valued the
stock at 9x its FY13E EPS and assigned it a target price of | 260.
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