Ashish Chugh, Investment Analyst & Author of Hidden Gems told CNBC-TV18, "Jayshree Tea and Industries is a part of BK Birla Group and the company is amongst the largest companies in the world as far as manufacturing of tea is concerned."
He further added, "This company is the second-largest tea producer in India. It has got 22 tea estates, which are present almost in the entire tea producing geography in the country. They have tea estates in south as well as in Assam and Darjeeling. This company is also into manufacturing of single superphosphate, sulphuric acid and they also have a sugar factory in Bihar."
"Its FY13 sales were about Rs 660 crore with a profit after tax (PAT) of Rs 40 crore. In the first half of the current financial year they have registered sales of close to Rs 300 crore with a PAT of about Rs 46 crore," Chugh said.
He further said, "Mcleod Russel is the largest tea company. If you analyse both companies closely, the operations of Mcleod is roughly 2.5 times that of Jayshree Tea. If I take only the tea business it is roughly 3 times the size of Jayshree Tea whereas the market cap of Mcleod is Rs 3,400 crore and Jayshree is just about Rs 240 crore, which is 14 times that of Jayshree Tea, so here I believe it is a deep value stock."
"This company has got an uninterrupted dividend track record for the past 20 years. This year this company paid a dividend of Rs 4 per share, which at the current price of Rs 82 translates into a dividend yield of about 5 percent. Promoters of late have been increasing their stake through market purchases and the best part is that you are getting this stock almost at four years low. The four-year low for the stock is about Rs 74-75 and you are currently getting the stock for about Rs 82-83. So I think from these levels I do not see too much of a downside," Chugh said.
He further added, "If you see the balance sheet, they do have a debt of close to Rs 400 crore, but against that there is a cash and cash equivalent of about Rs 150 crore, so you have a comfortable balance sheet. You are getting an asset rich company in a business where there are entry barriers. I am sure a new player acquiring 22 tea estates of 10,000 hectors, enterprise value if you see is just about Rs 500 crore. So there is this company with entry barriers and I believe it is available at very attractive valuations."
Disclosure: Analyst or his family does not hold the above stock.
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