CARE maintains fundamental grade of 3/5 on REI Agro

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CARE maintains fundamental grade of 3/5 on REI Agro

CARE Research has come out with its report on REI Agro (RAL). The research firm has assigned a valuation grade of 5/5 and fundamental grade of "3/5" to the company, in its September 13, 2011 report.

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CARE Research has come out with its report on REI Agro (RAL). The research firm has assigned a valuation grade of 5/5 and fundamental grade of "3/5" to the company, in its September 13, 2011 report.

Absence of trading revenues and shutdown at Bawal 1 led to fall in top line
RAL's top-line declined by 17 per cent y-o-y to Rs.785 crore as (1) the company did not carry out any trading activity during this quarter and (2) Bawal 1 unit was shut for capacity expansion and modernization.

Margins improvement led by change in revenue mix, higher realizations and lower tax rates
RAL's Q1FY12 EBITDA margin improved by 807 bps y-o-y to 28.5 per cent as compared to 20.4 per cent in Q1FY11. Key reasons for EBITDA margin expansion were (1) change in revenue mix as the company did not carry out any trading activity (which is a low-margin business). (2) Higher focus on high-margin domestic branded business (73 per cent of total revenues vs average 41 per cent in FY11) and (3) improvement in realizations in both branded head rice led by EBITDA margin expansion and lower tax rate (27.5 per cent in Q1FY12 vs 34.5 per cent in Q1FY11). PAT grew by 46.4 per cent to Rs.90.2 crore.

Valuation
The CARE Equity Research assigns valuation grade of 5/5 to REI Agro Limited. (RAL) based on the Current Intrinsic Value (CIV) of Rs.32.5 as against Current Market Price (CMP) of Rs.26, indicating that shares of RAL have 'Considerable Upside Potential'says CARE Equity Research report

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To read the full report click on the attachment