CRISIL maintains KRBL's fair value to Rs 31

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CRISIL maintains KRBL's fair value to Rs 31

CRISIL Research has come out with its report on KRBL. The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

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KRBL BSE | NSE 31/05/12 Are Mutual Funds betting on KRBL?

CRISIL Research has come out with its report on KRBL . The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

KRBL Ltd's Q3FY12 results outperformed CRISIL Research's expectations, in terms of both revenue and profitability, as sales of non basmati rice boosted the top line. KRBL's non basmati rice exports accounted for ~23% of its Q3 revenues, and are primarily responsible for the y-o-y revenue growth. The government had recently lifted a ban on non basmati rice exports. We have revised our FY12 estimates upwards on account of surge in KRBL's non basmati exports and expect the company to generate non basmati revenues going forward, provided the government continues to allow its exports. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis
• KRBL registered revenues of Rs 4,555 mn, a 21% growth over Q3FY11. During the quarter, the company exported non basmati rice which contributed Rs 1,064 mn to revenues. We had not factored in revenues from non basmati in our projections. Revenue from basmati rice was Rs 3,271 mn, around 7.5% lower y-o-y, as volumes declined by ~9% and blended realisation remained flat.

• EBITDA margin expanded by 113 bps y-o-y to 15.7% on account of 303 bps decline in raw material costs as a percentage of sales because paddy prices dropped significantly compared to FY11. This was partially offset by other expenses, which grew by 21% y-o-y due to higher packaging costs. KRBL also incurred higher promotional expenses during the quarter.

• Adjusted for notional forex loss, KRBL's PAT margin was 8.5% compared to 7.3% in Q3FY11. The company posted mark-to-market forex loss of Rs 151 mn on its Packing Credit in Foreign Currency (PCFC) loans as rupee depreciated by 8.4% against the US dollar. According to the management, this loss will revert in the subsequent quarters as the dispatches related to the loan take place. Reported PAT margin is 5.2%.

Key developments
In February 2011, the government reduced the minimum export price (MEP) for basmati rice from US$ 900 per tonne to US$ 700 per tonne. We believe this should boost export volumes for basmati rice and, therefore, aid in clearing excess inventory with the processors and traders.

Valuation: Current market price has strong upside
We continue to use the price-to-earnings multiple approach to value KRBL. We maintain our fair value estimate at Rs 31 per share. At the current market price of Rs 20, the valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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