Accumulate Mcleod Russel: Way2Wealth

Way2Wealth is bullish on Mcleod Russel and has recommended accumulate rating on the stock in its July 3, 2012 research report.

“World’s largest tea plantation company with 39,318 ha. dedicated tea plantations spread across 47 tea estates in Assam, 5 in West Bengal, 4 in Vietnam, 5 in Uganda and 1 in Rwanda. Aggregate production capacity stands at ~100 mn kgs - 82.6mn kgs in India, 4.5mn kg in Vietnam, 15mn kg in Uganda and 1.7 mn kgs in Rwanda. Forayed globally with its first acquisition of 100% stake in Phu Ben Co. in Vietnam in 2008, having a capacity of 4.5 mn kgs . In 2010, Mcleod acquired Rhwenzori Tea Investments Ltd. in Uganda having a capacity of 15 mn kgs. And the latest acquisition was of 1.7mn kg Gisovu Tea Garden, in Rwanda in 2011. Accounts for ~7.8% of India’s total tea production and ~2% of the global tea production.”
“With structural shift towards rising demand and supply gap year over year due to steadily rising global consumption, the tea prices are set to rise over long term. With all 3 main country producers of CTC reporting lower production going into CY12 there will be continued pressure on carry forward stocks and hence exert upward pressure on auction prices. We expect group consolidated production of 104.5 mn kgs (incl Vietnam, Uganda and Rwanada assets of McLeod) for FY13. Domestic & export realizations which had softened due to the normal production in all 3 producing countries in 2011 has again started to harden due the adverse weather conditions in North India. We expect operating margins to remain high in FY13 at about ~30% on the back of the crop shortfall. This is already evident from the 26% increase in prices of North India tea and rising prices. At the CMP `295.5/- the stock trades at 9.4x our revised 1-year forward FY13E EPS estimate of `31.4. We recommend investors can “Accumulate” the stock at current market price,” says Way2Wealth research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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