eid parry
DESCRIPTION
An in depth qualitative and quantitative analysis of Eid Parry India Ltd to ascertain its stock movement in long and medium term.TRANSCRIPT
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• Introduction• Qualitative Analysis• Quantitative Analysis• Industry Analysis• Investor Considerations: SWOT Analysis• Recommendations & Conclusion
Contents
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• 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
Distillation
Introduction
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Others – 2.3 %Neutraceuticals – 3.4 %
Bio Pesticides – 4.5 %
Power – 10.2 %
Alcohol – 6.7 %
Sugar – 72.9 %
Turnover Contribution (Total = 1291 Crores)
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1906, fertilizer manufacturing
Incorporated, 1975
1981, Murugappa Group
1788, Thomas Parry
Amongst Top 5 Sugar Producers of India
Introduction – Cont’d
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2004 – launched branded sugar – positive response across thousands of retail outlets
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`Introduction – Cont’d
M&A’s & HoldingsAcquisition 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%) 2011
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45.80%
22.70%
6.60%
24.90%
PromotersMFs, FI & BanksFIIOthers
Individual Owners: 4.22%
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Qualitative Analysis
A. Vellayan ChairmanMBA WarwickVP, SICC
V RavichandranVice ChairmanPGDM, IIM-ACost accountantCompany SecretaryAcquisition Expert
R S SinghviManaging DirectorCA, LLBEx-CEO29 years experience
Anand BhatiaDirectorEconomics, CambridgeEx-Unilever South AmericaEx-Lipton MD, India38 years Industrial ExperienceInvestors Greivance Commitee
R A SavoorDirectorB.Sc. TechnologyEx-MD Castrol40 years experienceChairman, Audit Committee
M V N RaoDirectorAgriculture ExpertAssociate, Chartered Inst. Of BankersFellow, IIBFEx MD, Chairman Canara Bank
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• 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• Kosher & Halal• Strong internal R&D
“Buy EID Parry as it is well managed”-G ChokkalingamED, CIO, Centrum Nov 15, 2011
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Quantitative Analysis
P/E Ratio & EPS Trend
Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 (Projected)-10
0
10
20
30
40
50
60
70
80
90
22.0
9.0
0.0 1.9
14.3
46.8
75.0
13.0 14.3
-1.9
77.8
23.8
4.6 3.6
P/EEPS
Source: Quantum
20%
60%
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Quantitative AnalysisOther Ratios
Profitability Liquidity & Solvency
Management Efficiency
Mar '07 Mar '08 Mar '09 Mar '10 Mar '11-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
ROCERONW
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Mar '07 Mar '08 Mar '09 Mar '10 Mar '110
0.5
1
1.5
2
2.5
Current RatioQuick RatioDebt-Equity Ratio
Profitability Liquidity & Solvency
Management Efficiency
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Mar '07 Mar '08 Mar '09 Mar '10 Mar '110
2
4
6
8
10
12
0.750000000000001 0.78
0.690000000000001
0.940000000000001 0.99
Debtors Turnover RatioInventory Turnover RatioAsset Turnover Ratio
Profitability Liquidity & Solvency
Management Efficiency
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Peers Avg ROE
Avg ROCE
Sales CAGR
Avg WC / Sales
PAT Margin
Debt / Equity
TTM P/E
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 17.6
Quantitative AnalysisPeer Comparison
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Quantitative AnalysisEV/EBITDA
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1996 1998 2000 2002 2004 2006 2008 2010 20120
100
200
300
400
500
600
700
800
900
Dividend %
Quantitative AnalysisDCF Analysis
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• Discounted cash flow analysis of EID Parry• Approach Style: Extremely conservative• Assumptions
Quantitative AnalysisDCF Analysis
Assumptions
Initial Dividend 400%
FV 1
Dividend Value 4
Dividend growth Rate, Primary 15%
Dividend growth Rate, Tertiary 7%
Returns Expected 14%
Primary Period 5 Years
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Quantitative AnalysisDCF 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) 1733.23
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Quantitative AnalysisDCF Analysis – cont’d
62.7%
EID Parry Ltd
Coromandel International Ltd (CIL)
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Quantitative AnalysisDCF Analysis cont’d
Inflection point
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Quantitative AnalysisDCF Analysis cont’d
2007 2008 2009 2010 20110
100
200
300
400
500
600
700
800
62% growth YoY!
PAT Growth – Coromandel
INR,
Cro
res
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Quantitative AnalysisDCF Analysis – cont’d
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%
100%
200%
300%
400%
500%
600%
700%
800%
25% 30%50% 55% 65% 70% 60% 65% 75% 85% 100%
175%
500% 500%
700%
FV = 1
Dividend Payouts of Coromandel
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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 years
Quantitative AnalysisDCF Analysis – cont’d
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Parameter 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
EID Parry Stake in Coromandel Market Cap, % 62.86%
EID Parry Stake in Coromandel Market Cap 4601.3 Crores
EID Parry Holding Discount* 50%
EID Parry Adjusted Stake in Coromandel Market Cap
2300.64 Crores
Quantitative AnalysisDCF Analysis – cont’d
Liquidation DiscountDiscount for lack of
controlDiscount for lack of
marketabilityRange: 15 – 40%
298.4 Yesterday’s close
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Parameter Value
EID Parry net value of Market Cap (IV based Market Cap of EID Parry + IV based
Market Cap of Coromandel)
1733.23 + 2300.64 = 4033.97
Paid up Equity, EID Parry 17.27
EID Parry DCF Price, (including 62.7 % Coromandel’s stake value)
232.95
Quantitative AnalysisDCF Analysis – cont’d
197 Yesterday’s close
(Underpriced)
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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 bank
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Quantitative AnalysisDCF Analysis – cont’d
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Quantitative AnalysisDCF Analysis – cont’d
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Quantitative AnalysisDCF Analysis – cont’d
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S
Strengths
Weakness
Opportunities
Threats
S W O T
Investor Consideration:SWOT Analysis
200 year old brand/legacy/assetsRecently consolidated capacitiesGovt Friendly policies for SAPLonger Crushing Season vs NorthInternal R&D, Strong managementBeta = 0.96Acres of land, book value = 38 CrCoromandel adds high value
Farmer’s side supply price controlLabour unavailability Selling price cap and regulationsWheat/Paddy crop competitionLand availability, permissions
Burgening Middle Class – lifestyleIndia is largest consumer for Sugar Alcohol expansion, New 5% mixing law Bio-Pesticide & Nutraceuticals expansionValenza acquisition to helpExports
MonsoonsGovernment Policy changesInternational Supply/Demand issuesHostile TakeoverSugar surplus, prices 12% down in 2012
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Recommendation & Conclusion
EID 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 takeover
Overall opinion – BUY
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Thank You
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