Eid parry

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An in depth qualitative and quantitative analysis of Eid Parry India Ltd to ascertain its stock movement in long and medium term.

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Eid parry

  1. 1. Contents• Introduction• Qualitative Analysis• Quantitative Analysis• Industry Analysis• Investor Considerations: SWOT Analysis• Recommendations & Conclusion05:14:38 1
  2. 2. Introduction• E.I.D-Parry India Ltd – Part of US $3 Billion Murugappa Group – Sugar accounts for approx. 90% of total revenue • 1167 crores – Strong presence in other sectors: • Bio Pesticides • Nutraceuticals• 9 sugar plants across South India – 32000 TCD Sugarcane, 146 MW Power, 230 KLPD Distillation05:14:38 2
  3. 3. Others – 2.3 %Neutraceuticals – 3.4 %Bio Pesticides – 4.5 %Power – 10.2 %Alcohol – 6.7 % Sugar – 72.9 % Turnover Contribution (Total = 1291 Crores)05:14:37 3
  4. 4. Introduction – Cont’d Amongst Top 5 Sugar Producers of India 1788, Thomas Parry05:14:38 4
  5. 5. 05:14:38 5
  6. 6. 2004 – launched branded sugar – positive response across thousands of retail outlets05:14:38 6
  7. 7. Introduction – Cont’d M&A’s & `Holdings Acquisition Year Coromandel 1995 & 2004 Godavari Fertilizers & Chem 2000 East India Sugars Pvt. Ltd. 2004 Santhanalakshmi Investments Pvt Ltd 2005 JV with Cargill – new plant 2006 New Horizons Sugar Mills Assets 2006 Valensa International Ltd (48%) 2008 Sadashiva Sugars (76%) 2009 Parrys Sugar Industries (65%) 2010 Valensa International Ltd (100%) 201105:14:38 7
  8. 8. 24.90% 45.80% Promoters 6.60% Individual Owners: 4.22% MFs, FI & Banks FII 22.70% Others05:14:37 8
  9. 9. Qualitative Analysis A. Vellayan Anand Bhatia Director Chairman Economics, Cambridge MBA Warwick Ex-Unilever South America VP, SICC Ex-Lipton MD, India 38 years Industrial Experience Investors Greivance Commitee V Ravichandran Vice Chairman R A Savoor PGDM, IIM-A Director Cost accountant B.Sc. Technology Company Secretary Ex-MD Castrol Acquisition Expert 40 years experience Chairman, Audit Committee R S Singhvi M V N Rao Managing Director Director CA, LLB Agriculture Expert Ex-CEO Associate, Chartered Inst. Of 29 years experience Bankers Fellow, IIBF05:14:38 Ex MD, Chairman Canara Bank9
  10. 10. • ISO 14001:1996 – Audited by British Standards Institute, UK• ISO 9001:2000 – Bereau Veritas (BVQI), France• Strong ERP Implementation – SAP – Computerized Procurement • Web based cane management system • GPS, GIS, Nutrient Analysis services for farmers – Decision Engine• HACCP Certification – Food Safety• GMP “Buy EID Parry as it is well managed”• Kosher & Halal -G Chokkalingam ED, CIO, Centrum• Strong internal R&D Nov 15, 201105:14:38 10
  11. 11. Quantitative Analysis P/E Ratio & EPS Trend 90 80 77.8 75.0 70 60 50 46.8 40 P/E EPS 30 23.8 22.0 20 14.3 14.3 13.0 9.0 10 4.6 3.6 0.0 1.9 20% 0 -1.9 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 -10 (Projected) Source: Quantum05:14:37 11
  12. 12. Quantitative Analysis Other Ratios Liquidity & Management Profitability Solvency Efficiency 80% 70% ROCE 60% RONW 50% 40% 30% 20% 10% 0% -10% Mar 07 Mar 08 Mar 09 Mar 10 Mar 1105:14:38 12
  13. 13. Liquidity & Management Profitability Solvency Efficiency 2.5 Current Ratio 2 Quick Ratio 1.5 Debt-Equity Ratio 1 0.5 0 Mar 07 Mar 08 Mar 09 Mar 10 Mar 1105:14:38 13
  14. 14. Liquidity & Management Profitability Solvency Efficiency 12 Debtors Turnover Ratio 10 Inventory Turnover Ratio Asset Turnover Ratio 8 6 4 2 0.94 0.99 0.75 0.78 0.69 0 Mar 07 Mar 08 Mar 09 Mar 10 Mar 1105:14:38 14
  15. 15. Quantitative Analysis Peer Comparison Peers Avg Avg Sales Avg WC / PAT Debt / TTM P/E ROE ROCE CAGR Sales Margin Equity 2007-2011 % % % % EID Parry 23.4 19.1 27.5 41.3 28.2 0.6 34.3 Bannari Amman 14.7 12.1 7.0 52.4 11.4 0.7 11.9 Bajaj Hind 2.0 3.6 20.7 89.3 2.6 1.8 20.6 Shri Renuka 16.5 12.4 96.0 30.8 6.6 1.0 54.0 Triveni Ind. 13.2 12.1 5.9 31.8 6.0 0.9 17.605:14:38 15
  16. 16. Quantitative Analysis EV/EBITDA05:14:38 16
  17. 17. Quantitative Analysis DCF Analysis Dividend % 900 800 700 600 500 400 300 200 100 0 1996 1998 2000 2002 2004 2006 2008 2010 201205:14:38 17
  18. 18. Quantitative Analysis DCF Analysis• Discounted cash flow analysis of EID Parry• Approach Style: Extremely conservative• Assumptions Assumptions Initial Dividend 400% FV 1 Dividend Value 4 Dividend growth Rate, Primary 15% Dividend growth Rate, Tertiary 7% Returns Expected 14%05:14:38 18 Primary Period 5 Years
  19. 19. Quantitative Analysis DCF Analysis cont’d Parameter Value Primary Value, PV 18.84 Terminal Value 160.91 Adjusted Terminal Value, TV 81.52 Total Intrinsic Value, IV = PV + TV 100.36 Paid up Equity, N 17.27 Total IV based Market Cap (IV x N) 1733.2305:14:38 19
  20. 20. Quantitative Analysis DCF Analysis – cont’d EID Parry Ltd 62.7% Coromandel International Ltd (CIL)05:14:38 20
  21. 21. Quantitative Analysis DCF Analysis cont’d Inflection point05:14:38 21
  22. 22. Quantitative Analysis DCF Analysis cont’d 800 PAT Growth – Coromandel 700 600 500INR, Crores 400 300 200 100 0 2007 2008 2009 2010 2011 05:14:38 22
  23. 23. Quantitative Analysis DCF Analysis – cont’d800% Dividend Payouts of Coromandel 700%700% FV = 1600% 500% 500%500%400%300% 175%200% 70% 75% 85% 100%100% 50% 55% 65% 60% 65% 25% 30% 0% 1997 05:14:38 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 23
  24. 24. Quantitative Analysis DCF Analysis – cont’d Parameter - Coromandel Value Dividend % 450% Dividend Value, FV=1 4.5 Dividend growth Rate, Primary 50% Dividend growth Rate, Tertiary 7% Returns Expected 14% Primary Period 5 years05:14:38 24
  25. 25. Quantitative Analysis DCF Analysis – cont’d 298.4 Yesterday’s Parameter close Value DCF Intrinsic Value (IV) of Coromandel* 259.20 Paid Up Equity of Coromandel 28.24 Market Cap of Coromandel as per IV 7319.89 Crores Liquidation Discount Discount for lack of EID Parry Stake in Coromandel Market Cap, % control 62.86% Discount for lack of marketability EID Parry Stake in Coromandel40% Range: 15 – Market Cap 4601.3 Crores EID Parry Holding Discount* 50% EID Parry Adjusted Stake in Coromandel 2300.64 Crores Market Cap05:14:38 25
  26. 26. Quantitative Analysis DCF Analysis – cont’d Parameter Value EID Parry net value of Market Cap 1733.23 + 2300.64 = (IV based Market Cap of EID Parry + IV based 4033.97 Market Cap of Coromandel) 197 Yeste Paid up Equity, EID Parry 17.27 clos (Underp EID Parry DCF Price, 232.95 (including 62.7 % Coromandel’s stake value)05:14:38 26
  27. 27. Industry Analysis• Sugar Industry – 2nd largest agro industry after textiles• India: 2nd largest sugar producer – 24.6 mt• Sugarcane: 70% of total cost of production• Regulation – Supply price • Statutory Minimum Price (SMP) • Fair and Remunerative Price (FRP) @ 145/- per quintal • States set State advised price (SAP) – Most political commodity • Used for vote bank05:14:38 27
  28. 28. Quantitative Analysis DCF Analysis – cont’d05:14:38 28
  29. 29. Quantitative Analysis DCF Analysis – cont’d05:14:38 29
  30. 30. Quantitative Analysis DCF Analysis – cont’d05:14:38 30
  31. 31. Investor Consideration: S SWOT Analysis 200 year old brand/legacy/assets Farmer’s side supply price control Recently consolidated capacities Labour unavailability Govt Friendly policies for SAP Selling price cap and regulations Strengths Longer Crushing Season vs North Internal R&D, Strong management Weakness Wheat/Paddy crop competition Land availability, permissions Beta = 0.96 Acres of land, book value = 38 Cr Coromandel adds high value SWOTBurgening Middle Class – lifestyle MonsoonsIndia is largest consumer for Sugar Government Policy changesAlcohol expansion, New 5% mixing law International Supply/Demand issues OpportunitiesBio-Pesticide & Nutraceuticals expansion Threats Hostile TakeoverValenza acquisition to help Sugar surplus, prices 12% down in 2012Exports 05:14:38 31
  32. 32. Recommendation & ConclusionEID Parry• Poised for medium term bull run• Short term fall of stock price • due to sugar oversupply • may hit sugar producers stock prices in 2012• Coromandel financial performance • Driver for upside • Positive outlook - fertilizer industry • Demand – supply gap• Candidate for a hostile takeoverOverall opinion – BUY 05:14:38 32
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