Buy KS Oils; target of Rs 76: Prabhudas Lilladher

“KS Oils’ (KSO) net sale has shown a growth of ~14% YoY to Rs 10303 million against our expectation of Rs 11339 million during Q1FY11 due to lower-than-expected volume growth. Mustard oil volumes and sales grew by ~54% and ~51%, respectively. Strong mustard oil sales growth has been offset by ~22% degrowth in refined oil sales. Company’s branded oil sales have grown by ~27% to Rs 6863 million on the back of a strong volume growth of ~25%. Company has been able to show a strong volume growth on the back of increasing penetration from newer markets like Tier II and Tier III, along with strengthening and launching brands in its present markets.”

“We are positive on the stock on account of its strong edible oil market presence, its growth potential and discounted valuation. At present, the stock is trading at near-to-lower end of its historical forward P/E band of 7x-14x. We maintain our ‘BUY’ rating on the stock,” says Prabhudas Lilladher research report.

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