Sunidhi Securities is bullish on JVL Agro Industries and has recommended a 'Buy' rating on the stock with a target price of Rs 30 in its December 10, 2014 research report.
Sunidhi Securities' report on JVL Agro Industries
"JVL Agro Industries (JVL) formally known as Jhunjhunwala Vanaspati Limited, incorporated in the year 1989, manufactures hydrogenated vegetable oil (vanaspati ghee) and refined oils, at its manufacturing facility in Varanasi, Uttar Pradesh located in North India. JVL started as a modest unit, with a production capacity of 25 MT/day is today the single largest manufacturing Company of hydrogenated vegetable oil in India producing over 300 MT/day. The name of the Company was changed from Jhunjhunwala Vanaspati Limited to JVL Agro Industries Ltd in 2008.
JVLAIL's manufacturing facilities are strategically located at Varanasi (Uttar Pradesh), Dehri-on-Sone (Bihar), Alwar (Rajasthan) and Haldia (West Bengal.
During Q2FY15, net profit jumped 42% to Rs 18.9 crore on 53% higher sales of Rs 1170 cr. Q2FY15 EPS stood at Rs 1.1 against Rs 0.8 in Q2FY14.During H1FY15, net profit rose 20% to Rs 35.9 crore on 18% higher sales of Rs 2389 crore. H1FY15 EPS stands at Rs 2.1 against Rs 1.8 in H1FY14.
During FY14, net profit rose 1.9% to Rs 62.8 crore on 11% higher sales of Rs 4884 crore. EPS stood at Rs 3.7. A dividend of 20% was paid.
The financials of edible oil companies are likely to improve in the coming quarters, owing to higher revenue growth on account of increased high sea sales and refinery sales. With an increase in the proportion of the higher-margin refinery sales to overall sales, the profitability and margins of companies are likely to improve significantly in 2014-15 compared to the levels seen in 2013-14 and 2012-13, India Ratings forecasts.
The agency expects fully integrated refiners with wider product portfolios to benefit more than those with limited product diversification. Companies whose portfolios include branded products, such as JVL will see additional gains.
JVL will leverage a stronger product portfolio – vanaspati, mustard oil, palm refined and soybean – accounting for 70 per cent of the edible oils consumption basket in India. This wider portfolio will translate into a stronger customer accretion and enhanced branding effectiveness, which will progressively translate into higher sales and lower selling cost, leading to higher profitability.
This progressive evolution from a manufacturing centric company addressing the low-mid end of the market to a point where it addresses the premium segment, is expected to translate into enhanced revenues, margins, surpluses and organizational growth.
At the current market price of Rs 19, the share is trading at a P/E of 4.0x on FY15E and 3.4x on FY16E. We recommend BUY with a target price of Rs 30 at which, the share will trade at a P/E of 5.5x on 16E", says Sunidhi Securities research report.
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