EID Parry - Mild performance but outlook still bright - KR Choksey

Another mild performance witnessed by EID Parry (India) Ltd. It reported revenue de-growth of 6% y-o-y to Rs2,798 cr, below our expectation. Sugar division registered lower volumes with stability in realizations however farm input division posted de-growth in revenues. Consolidated EBITDA declined 53% y-o-y to Rs105cr on account of margin contraction in farm input division and higher other expenditures. Consolidated it reported a net loss of Rs46cr aided by higher interest expenses and lower other income.

Top-line impacted significantly:

EID Parry (India) reported consolidated net sales de-growth of 6% y-o-y to Rs2,798cr. Lower recovery rate, dry monsoon impacted yield in Maharashtra and Karnataka state during the quarter. However, it witnessed uptick in price realization. Furthermore, Farm input division registered 9% y-o-y de-growth in revenues at Rs2,424cr, leading to de-growth at consolidated level. However, Bio-products revenue clocked 20% y-o-y growth to Rs57cr.

Operating performance - a worst in past 9 quarters:

EBITDA registered de-growth of 9% y-o-y to Rs105cr on a consolidated basis. Consequently, EBITDA margin declined by 367bps y-o-y to 3.7%, mainly on account of farm input division which registered PBIT margin decline of 336bps y-o-y and bio products division and loss at PBIT level by sugar division due to high cane prices. EID Standalone clocked EBITDA loss of Rs6cr against Rs23cr loss on y-o-y basis.

Bottom-line follows the operating trend: It reported consolidated adjusted net loss of Rs46cr v/s Loss of Rs1cr, on account of carry-on effect of EBITDA loss further added by higher interest costs, which impacted bottom-line significantly. EID Parry Standalone posted net loss at Rs22cr as against loss of Rs48cr in Q3FY12, indicating some improvement at operating level.

Key highlights: Management expect Q4 FY13 recovery rate at 9.8% and expects to crush 20-25lacs tonnes sugarcane. They believe production in the next sugar season will be lower than the ongoing season and expect domestic prices to remain stable at current level.

Valuations & Views - Subdued performance of Coromandel International and Sugar division due to lower recovery rate, higher input costs, decline in volumes attributed to overall weak financials. However, we believe the recent correction in stock prices factored the poor performance. Going forward, uptick in volumes, stable prices and improvement in subsidiary performance will help to fuel the growth. Therefore, we maintain our BUY rating on the stock with SOTP based target price of Rs265.

Source : Equity Bulls

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