Buy KRBL with target price of Rs 203: Dimensional Research

Dimensional Research report on KRBL:

KRBL is the largest basmati rice processor

“KRBL dominates the Basmati rice production and export scenario in India. Being the world's largest Basmati exporter, it holds 11% market share of India's export turnover. It accounts for 12%, 20% and more than 50% of the exports to Saudi Arabia, Kuwait and the US respectively.”

New integrated facility to increase value added By- Products.

“KRBL has completed the acquisition of the erstwhile Oswal Agro Furane Plant (now Dhuri plant) at a cost of Rs 16 cr and has further invested Rs 80 cr. To upgrade the logistics and infrastructure. This has resulted in the capacity of the plant getting enhanced to 150MT/hour. Further, the fully integrated nature of the plant will ensure value added by products.”

Growing market in the domestic space.

“The domestic Branded basmati market rice is growing at about 6% per annum. The growth in the organized retailing could propel the growth of the Branded basmati rice further. In addition, growing middle class and rising income levels should see a shift from non- Basmati / unbranded rice to Branded Basmati. This should help the company with its good Brand image and a plethora of Brands at various price points.”

Additional revenue stream to prop up profits.

“The company would be generating electricity at power plant in Gaziabad and also from the wind power which would commence on 15th August. The power plant at Gaziabad is scheduled to commence from Dec 06. the sale of power would provide additional revenue . Also the company will be eligible for carbon credits for the same.’

VALUATION

“At the CMP of Rs. 125.15/- the stock is trading at valuation of 5.45 X FY07E EPS and 4.34 X FY08E EPS. of Rs.23.1 and Rs 29 respectively. We therefore initiate a coverage on this stock with a BUY recommendation with a target price of Rs 203/- in 12-15 months horizon.”