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Jayshree Tea: Realisations fall, volumes sustain…
Jayshree Tea’s Q3FY11 results were below our expectation with net
sales declining ~10% to | 126.9 crore against | 141.1 crore in Q3FY10.
The dip in sales was due to a fall in realisation from ~| 130/kg in
Q3FY10 to ~| 122/kg in Q3FY11. The employee cost during the quarter
increased significantly to 25% of sales from 19.3% in Q3FY10. This was
due to the increase in labour wages by ~| 3.5/kg implemented in
January, 2010. Thus, margins in Q3FY11 slipped by 460 bps to 19.7%
against 24.3% in Q3FY10. Jayshree’s interest cost during the quarter
increased ~200% to | 4.98 crore against | 1.67 crore in Q3FY10 on the
back of higher debt of ~| 100 crore raised by the company to fund its
acquisitions in Rwanda. Hence, driven by lower EBITDA, higher
interest cost and fall in other income by ~5% to | 2 crore in Q3FY11, the
bottomline during the quarter was down ~40% to | 19.8 crore against |
33.2 crore in the corresponding quarter last year.
Operational highlights
The company sold a total of 8.61 million kg of tea in Q3FY11 at an
average realisation of | 122/kg. The total quantity of tea produced (bought
and own production) during the quarter was 7.36 million kg. Though the
volume of tea sold was in line with the corresponding quarter in FY10,
realisations were lower, thereby dragging down revenues from tea by
~16% to | 104.9 crore against | 125 crore in Q3FY10.
Valuation
At the CMP of | 155, the stock is trading at 6.2x and 5x its FY11 and FY12
estimated EPS of | 25.1 and | 30.7, respectively. With tea production in
India in 2011 expected to be at the same level at 966 million kg and
production in Kenya and Sri Lanka expected to decline, we believe tea
prices would remain firm, subsequently improving the company’s
earnings. Hence, we have valued the stock at 6x its FY12E EPS to arrive at
a target price of | 175 with a BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jayshree Tea: Realisations fall, volumes sustain…
Jayshree Tea’s Q3FY11 results were below our expectation with net
sales declining ~10% to | 126.9 crore against | 141.1 crore in Q3FY10.
The dip in sales was due to a fall in realisation from ~| 130/kg in
Q3FY10 to ~| 122/kg in Q3FY11. The employee cost during the quarter
increased significantly to 25% of sales from 19.3% in Q3FY10. This was
due to the increase in labour wages by ~| 3.5/kg implemented in
January, 2010. Thus, margins in Q3FY11 slipped by 460 bps to 19.7%
against 24.3% in Q3FY10. Jayshree’s interest cost during the quarter
increased ~200% to | 4.98 crore against | 1.67 crore in Q3FY10 on the
back of higher debt of ~| 100 crore raised by the company to fund its
acquisitions in Rwanda. Hence, driven by lower EBITDA, higher
interest cost and fall in other income by ~5% to | 2 crore in Q3FY11, the
bottomline during the quarter was down ~40% to | 19.8 crore against |
33.2 crore in the corresponding quarter last year.
Operational highlights
The company sold a total of 8.61 million kg of tea in Q3FY11 at an
average realisation of | 122/kg. The total quantity of tea produced (bought
and own production) during the quarter was 7.36 million kg. Though the
volume of tea sold was in line with the corresponding quarter in FY10,
realisations were lower, thereby dragging down revenues from tea by
~16% to | 104.9 crore against | 125 crore in Q3FY10.
Valuation
At the CMP of | 155, the stock is trading at 6.2x and 5x its FY11 and FY12
estimated EPS of | 25.1 and | 30.7, respectively. With tea production in
India in 2011 expected to be at the same level at 966 million kg and
production in Kenya and Sri Lanka expected to decline, we believe tea
prices would remain firm, subsequently improving the company’s
earnings. Hence, we have valued the stock at 6x its FY12E EPS to arrive at
a target price of | 175 with a BUY rating.
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