CRISIL maintains valuation grade of 4/5 to Harrisons

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CRISIL maintains valuation grade of 4/5 to Harrisons

CRISIL Research has come out with its report on Harrisons Malyalam. The research firm has maintained the fundamental grade of 3/5 to the company in its February 10, 2012 report.

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CRISIL Research has come out with its report on Harrisons Malyalam . The research firm has maintained the fundamental grade of 3/5 to the company in its February 10, 2012 report.

Harrisons Malyalam Ltd's (Harrisons') Q3FY12 revenues were below our expectations while profitability was ahead of our estimates. Revenues were flat compared to Q3FY11, as growth in the tea segment was offset by de-growth in the rubber and engineering divisions. We may revise our estimates post interaction with the management. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis
• Revenues declined 1% y-o-y to Rs 941 mn due to dip in rubber and engineering divisions' revenues. While the rubber segment's revenues declined by 4% y-o-y, the engineering segment's revenues decreased by 34%. This was partially offset by 13% growth in the tea segment.

• EBITDA margins expanded by 534 bps y-o-y on account of the decline in raw material costs which were lower by 1,306 bps as a percentage of sales.

• Harrisons posted EBIT margin of 12%, 529 bps expansion over the corresponding period last year. This is primarily on account of the rubber segment, where operating profit margin increased by 373 bps y-o-y. While the tea segment continued to report a loss, EBIT loss decreased from 23% in Q3FY11 to 10% in Q3FY12.

• PAT margin grew by ~186 bps y-o-y to 7.7%. Consequently, EPS for Q3FY12 was Rs 4.0 compared to Rs 3.0 in Q3FY11, implying a y-o-y growth of 30.5%.

Key developments
Harrisons' board of directors approved the demerger and vesting of six rubber estates and seven tea estates of Harrisons into Harrisons Plantations Ltd either directly or indirectly with effect from April 1, 2012. Further, shareholders of Harrisons will be entitled to shares in Harrisons Plantations Ltd in the same proportion as their current shareholding in Harrisons. The scheme is subject to shareholder and regulatory approvals. We await more clarity from the company on this development.

Valuations: Current market price has upside
We continue to use the discounted cash flow method for valuation. At the current market price of Rs 76, the valuation grade is 4/5.

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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