Hold Mcleod Russel; target of Rs 215: R K Global

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Hold Mcleod Russel; target of Rs 215: R K Global

R K Global has recommended hold rating on Mcleod Russel (India) with a target of Rs 215, in its February 2, 2012 research report.

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R K Global has recommended hold rating on Mcleod Russel (India) with a target of Rs 215, in its February 2, 2012 research report.

"McLeod Russel Ltd, the world's biggest tea producer reported a modest ~7% YoY growth in Gross Revenue (GR) & Net Revenue (NR) (~2% lower than our estimates in GR & ~1% in NR for the Q3FY'12, deemed very close) to Rs3,936 mn on the back of a record production in India, which stood close to 990 mn kgs for the CY'11. However, the PAT remained short from our expectation."

"The company's revenue came in tandem with our forecasted numbers, citing a minor difference of ~1% from our forecasted numbers. The company incurred around 20-22 mn kgs of higher tea productions this in CY'11 till Q3FY'12. The company exported close to ~190-195 mn kgs of tea this Q and was heavily benefitted by the depreciating INR, which lead to the gain in revenue. Adding to the gain was tea prices, which went up by around Rs6/kg as compared to last year. For some kind of the lower category teas the prices were a little lower because some of the exporting countries have got impacted, especially the EU countries. Though, consumption is growing and shortages are building build-up (that happened in the last two Qs). So, Prices actually had to go up to really to meet up these kind of shortages and suffice the shortages, which the company experienced in Q3FY'12."

"The company's EBIDTA fell by ~12% to Rs1,299 mn YoY and also gave disappointing numbers on the margin front due to stagnant realization on the tea prices (though comparatively higher). PAT at Rs1,172 mn induces belief that the ongoing price hikes in tea will linger on through the forward Qs. On the interests front, interests payable for the Q was ~53 mn, gives a very good picture that the balance sheet is drastically improving. The production ahead is expected to fall because even in the worst weather conditions and normal production could hit, and that has compelled us to cut the stock rice to a good extent. At CMP, the stock trades at a P/E & P/BVPS of ~3.8x and ~1.0x respectively for FY'13E EPS & BVPS. We reiterate, our HOLD rating, with a revised TP of Rs207, showing an upside potential of ~11.6% from current levels, factored over a P/E of ~4.2x & P/BVPS of ~1.0x using FY'13E EPS of Rs50 and BVPS of Rs209," says R K Global research report.  

FIIs holding more than 30% in Indian cos

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To read the full report click on the attachment