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Saral Gyan Hidden Gem Dec 2010
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Saral Gyan Hidden Gem Dec 2010

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  • 1. EQUITY RESEARCH REPORT PICCADILY AGRO INDUSTRIES LTD. BSE CODE: 530305Industry: Sugar CMP: Rs. 35.95 (19/12/2010)Market Cap: 847.47 (Million) Target Price: Rs. 75Date: Dec 19, 2010 Time Period: 18 – 24 months Saral Gyan Capital Services www.saralgyan.in An Independent Equity Research Firm
  • 2. HIDDEN GEMS – DEC 2010 TABLE OF CONTENTS.No Content Page No.1. Company Background 032. Recent Developments 043. Financial Performance 054. Charts & Graphs 075. Peer Group Comparison 096. Key Concerns 097. Saral Gyan Recommendation 108. Disclaimer 11 -2- SARAL GYAN CAPITAL SERVICES
  • 3. HIDDEN GEMS – DEC 20101. Company BackgroundPiccadily Agro Industries Ltd is an India-based company. The companys principal activityis to manufacture sugar and their by-products. They operate in two segments, namelysugar, which is engaged in the production of sugar, molasses and bagasse, and other,which is engaged in the manufacturing of liquor. Their plant is located at Bhadson inHaryana. Piccadily Agro Industries Ltd was incorporated in the year 1994. Haryana StateInvestment Development Corporation and Piccadily Hotels Pvt Ltd and their associatespromoted the company. They set up a new plant for the manufacture of white crystalsugar refined sugar with the installed capacity of 2500 TCD along with the facilities forco-generation of 6 MW power at Bhadson in Haryana.During the year 2002-03, the company completed the erection of semi kesener andboiler and functioning from February 2002. During the year 2002-03, they expanded thecrushing capacity from 2500 TCD to 5000 TCD at their plant in Bhadson, Haryana. Thecompany started commercial production in their ENA unit with effect from April 28,2009. -3- SARAL GYAN CAPITAL SERVICES
  • 4. HIDDEN GEMS – DEC 20102. Recent Developmentsi) At the end of FY07, the company was only into sugarcane crushing and thus into theproduction of raw sugar, however they had started with the setting up of liquor facility.So, till FY07 they were largely a loss making company.ii) For FY08 the company had started with the liquor production and sold some 2.17million cases. In that year the company made a net profit of just Rs 12 million but thatwas on account of 50 million loss from Sugar Division. At the end of FY08 the companyhad some 270 million capital work in progress, so they were still expanding their liquorfacility.iii) For FY09 the company sold 2.86 million cases with a turnover of 480 million. Thecompany achieved Rs 54 million profit from liquor and 32.9 million profit from Sugar i.e.around 87 million net profit. At the end of FY09 the company had 430 million capital forwork in progress. This was again for the expansion of liquor unit.iv) For FY10 the company did a turnover of Rs 820 million from liquor unit i.e. almost a70% increase in revenue for liquor unit over FY09. The company achieved a Profit beforeTax of around 170 million from liquor unit and assuming 33% tax, a net profit of Rs 113.9million, so more than 100% increase in net profit from the liquor unit of the company.v) At the end of FY10 the company has close to Rs 600 million debt on its books,however most of it has gone towards expansion. Between FY09 and FY10 the Grossblock of the company increased by Rs 330 million from Rs 830 million to Rs 116 million,while there is another Rs 130 million capital work in progress -4- SARAL GYAN CAPITAL SERVICES
  • 5. HIDDEN GEMS – DEC 20103. Financial PerformancePiccadily Agro Industries reports net profit of Rs 50.37 million in September 2010Piccadily Agro Industries reported net profit of Rs 50.37 million in the quarter endedSeptember 2010 as against profit of Rs 35.16 million during the previous quarter endedSeptember 2009. Sales rose 31.79% to Rs 428.06 million in the quarter endedSeptember 2010 as against Rs 324.81 million during the previous quarter endedSeptember 2009.Piccadily Agro Industries net profit rises 52.58% in the June 2010 quarterNet profit of Piccadily Agro Industries rose 52.58% to Rs. 59.2 million in the quarterended June 2010 as against Rs 38.8 million during the previous quarter ended June2009. Sales rose 30.51% to Rs 467.5 million in the quarter ended June 2010 as against Rs358.2 million during the previous quarter ended June 2009 Last 6 Quarters Net Sales & Profit 800 707.7 700 600 Rs in Millions 494.32 500 428.06 400 366.71 324.81 294.55 300 200 100 38.76 48.48 59.22 50.37 35.16 0 -23.94 -100 1 2 3 4 5 6 Net Sales 366.71 324.81 294.55 707.7 494.32 428.06 Net Profit 38.76 35.16 48.48 -23.94 59.22 50.37 Jun 09 Sep 09 Dec 09 Mar 09 Jun 10 Sep 10 -5- SARAL GYAN CAPITAL SERVICES
  • 6. HIDDEN GEMS – DEC 2010 Current & Expected Earnings: Quarterly Ended Profit & Loss Account Particulars Dec Mar Jun Sep Dec Mar (Rs in Millions) 2009 2010 2010 2010 2010E 2010EAudited / UnAudited UA UA UA UA UA UANet Sales 294.55 707.7 494.32 428.06 486.45 587.88Total Expenditure 224.1 607.9 390.44 342.07 351.21 501.45PBIDT (Excl OI) 70.45 99.8 103.88 85.99 135.24 86.43Other Income 1.06 2.53 2.16 6.69 4.67 3.44Operating Profit 71.51 102.35 106.04 92.68 139.91 89.87Interest 8.13 11.9 17.91 16.07 19.21 15.41Exceptional Items 0 0 0 0 0 0PBDT 63.4 90.45 88.13 76.61 120.7 74.46Depreciation 14.92 13.6 14.88 15.95 18.5 13.42Profit Before Tax 48.48 76.85 73.25 60.66 102.2 61.04Tax 0 100.77 14.02 10.29 19.1 10.61Provisions and contingencies 0 0 0 0 0 0Profit After Tax 48.48 -23.94 59.22 50.37 83.1 50.43Extraordinary Items 0 0 0 0 0 0Prior Period Expenses 0 0 0 0 0 0Other Adjustments 0 0 0 0 0 0Net Profit 48.48 -23.94 59.22 50.37 83.1 50.43Equity Capital 235.85 235.85 235.85 235.85 235.85 235.85Face Value (IN RS) 10 10 10 10 10 10ReservesCalculated EPS 2.06 -1.02 2.51 2.14 3.52 2.14Calculated EPS (Annualised) 8.22 -4.06 10.04 8.54 14.09 8.54No of Public Share Holdings 7671000 7419000 7338000 7338000 7338000 7338000% of Public Share Holdings 32.53 31.46 31.12 31.12 31.12 31.12 Expected Earnings for 3rd & 4th Qtr FY 2010-11: We expect Piccadily Agro Industries will post robust growth in coming quarters with sugar as well as liquor division. Company operating margins in liquor segment are higher than other well established players in the same segment. In financial front, company’s performance has improved significantly in last two years; Piccadily agro industries has posted strong financial results backed by good demand of sugar in domestic market and robust sales and revenue growth in liquor business. -6- SARAL GYAN CAPITAL SERVICES
  • 7. HIDDEN GEMS – DEC 20104. Charts & Graphsi) Share Price Moving Average:Piccadily Agro Industries Ltd is currently trading near to its 50 days and above its 200days price moving average.ii) Comparative Graph:Piccadily Agro Industries has outperformed all indices and gave returns of 108.4% in lastone year. -7- SARAL GYAN CAPITAL SERVICES
  • 8. HIDDEN GEMS – DEC 2010iii) Performance Chart:iv) Share holding Pattern:Promoters have increased their share holding from 59.18% to 68.89% in last two years.Promoters holdings is increased by 0.45% from 68.54% to 68.89% in last 2 quarters. -8- SARAL GYAN CAPITAL SERVICES
  • 9. HIDDEN GEMS – DEC 20105. Peer Group Comparison Piccadily Empee Jeypore KesarPEER GROUP Agro Sugars Sugars Enterprises Oudh Sugar CMP 35.95 64.95 161.25 58.65 39.15 52 W H/L 53.80/12.55 83.90/19.20 358/141.25 41.10/151.55 84.80/32.00 Market Cap 847.87 2726.14 731.19 398.24 1014.68Results (in Mn) 10-Sep 10-Sep 10-Jun 10-Sep 10-Jun Sales 428.06 691.9 444.77 410.73 1406.74 PAT 50.37 118.61 -131.37 -184.75 -342.51 Equity 235.85 419.7 45.35 67.9 260.45 EPS 5.69 3.83 -25.1 -23.04 -43.67 P/E 6.32 16.98 0 0 06. Key Concerns / Risks i) Slowness in demand and increase in raw material prices can hit profit margins of the company in sugar division. ii) Highly competitive market with local players available in sugar industry. -9- SARAL GYAN CAPITAL SERVICES
  • 10. HIDDEN GEMS – DEC 20107. Saral Gyan Recommendationi) At the end of Sep10 the Management holds 68.89% equity stake in the companywhich is very good by any standards.ii) Over the last 2 years the Management has increased their stake by almost 10%. Atthe end of Dec08 they had 59.18% stake in the company while at present they hold68.89% stake. The Promoters made open market purchase as recently as May10.iii) For the half year ending Sep10, the company has recorded a more than 100% growthon YOY basis. The company is trading at a forward earnings PE multiple of 3.5 while theother listed companies command much higher PE multiples of 15-30.iv) Although company is a small player in comparison to the larger players in the sameliquor segment, however it maintains one of the highest margins in the liquor segment.v) Company has paid dividend of 10% in 2010. At current market price, dividend yieldworks out as 2.78%.vi) On equity of Rs. 235.85 million the estimated annualized EPS works out to Rs. 10.3and the Book Value per share is Rs. 26.51. At a CMP of Rs. 35.95, stock price to bookvalue is 1.36. The scrip is trading at 3.5 X FY 2010-11 estimated earnings which make itan attractive buy at current market price.Saral Gyan Team recommends “BUY” for Piccadily Agro Industries Ltd. at currentmarket price of 35.95 for a target of Rs. 75 over a period of 18-24 months. - 10 - SARAL GYAN CAPITAL SERVICES
  • 11. HIDDEN GEMS – DEC 20108. DisclaimerImportant Notice: Saral Gyan Capital Services is an Independent Equity Research Company.Disclosure: The author of this article does not hold shares in the recommended company.© SARAL GYAN CAPITAL SERVICESThis document prepared by our research analysts does not constitute an offer or solicitation forthe purchase or sale of any financial instrument or as an official confirmation of any transaction.The information contained herein is from publicly available data or other sources believed to bereliable but we do not represent that it is accurate or complete and it should not be relied on assuch. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in anyway responsible for any loss or damage that may arise to any person from any inadvertent errorin the information contained in this report. This document is provide for assistance only and isnot intended to be and must not alone be taken as the basis for an investment decision. - 11 - SARAL GYAN CAPITAL SERVICES