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Last Updated : Mar 16, 2013 02:56 PM IST | Source: Moneycontrol.com

CRISIL maintains valuation grade of 5/5 to Maharaja Shree

CRISIL Research has come out with its report on Maharaja Shree Umaid Mills. The research firm maintains fundamental grade of 2/5, indicating that its fundamentals are moderate relative to other listed securities in India.

 
 
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CRISIL Research has come out with its report on Maharaja Shree Umaid Mills. The research firm maintains fundamental grade of 2/5, indicating that its fundamentals are moderate relative to other listed securities in India.


Maharaja Shree Umaid Mills Ltd’s (MSUM’s) Q3FY13 earnings were above CRISIL Research’s expectations. Standalone revenues increased by 7.7 percent q-o-q to Rs 1,257 mn (up 13.5 percent y-o-y) driven by healthy growth in both yarn and fabric divisions. Standalone EBITDA margin expanded by 367 bps q-o-q to 17.5 percent due to better product mix in the fabric division and lower other expenses. Other expenses declined by 11.1 percent q-o-q. Adjusted PAT grew by 81.2 percent q-o-q to Rs 144 mn. Adjusted PAT margin improved by 464 bps q-o-q to 11.4 percent. Adjusted EPS was Rs 5.5 compared to Rs 3.1 in Q2FY13. We maintain our fundamental grade of 2/5, indicating that its fundamentals are moderate relative to other listed securities in India.


Volumes boost yarn division, realisations boost fabric division: The yarn division’s sales volume increased 15 percent q-o-q due to good export demand. However, its realisations declined by 5 percent q-o-q, leading to an overall growth of 10 percent q-o-q for the division. The fabric division’s volume declined by 4 percent q-o-q while realisations increased 10 percent q-o-q due to higher contribution from value-added bottom wear and specialty fabrics.


Better product mix leads to higher margins: Standalone EBIT margin expanded by 516 bps q-o-q to 14 percent due to increase in the fabric division’s margins. Higher contribution from value-added bottom wear and specialty fabrics (contribution increased to 47 percent of fabric revenues from 36 percent in Q2FY13) led to the expansion in the fabric division’s margin. The yarn division’s margins remained stable.


Expansion plans on track: MSUM has completed installation of 96 shuttle-less looms for bottom wear fabrics (a part of which will be used for captive consumption), which is expected to be commissioned in March 2013. Installation of equipment for the 19 mn meters processing capacity is proceeding well and the same is also expected to be commissioned by March 2013. MSUM has commissioned an additional 2.1 MW wind power facility in February, which takes its overall wind power capacity to 17.4 MW. The commissioning of the high-margin (88-90 percent) wind power capacity and a shift towards value-added fabrics are expected to support MSUM’s EBITDA margin.


Lack of clarity on utilisation of surplus cash and development of land: We do not see any firm plan from MSUM yet either to utilise its surplus cash (Rs 4.1 bn) or to develop the land in Kota (50 acres) and Pali (69 acres). Land and cash account for 60 percent of the company’s value.


Fair value revised downwards following lower valuation for land in Kota: We continue to use the sum-of-the-parts method to value MSUM and have rolled forward our valuation to FY15. Our valuation for the Kota land has been revised from Rs 65 to Rs 12 due to low visibility on development of the same. Accordingly, our fair value has been revised downwards to Rs 246 per share. At the current market price of Rs 110, our 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.


© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

 



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First Published on Mar 16, 2013 02:56 pm
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