EID Parry India - Sugar business props up Q4 - Edelweiss

EID Parry's (EID) Q4FY13 PAT at INR748mn was marginally above our estimated INR641mn on account of better performance in the sugar business following higher volume and realization. This was despite its subsidiary, Coromandel International's (CRIN) subdued performance. The management believes sugar production in India during the next season (Oct-March'14) will be lower and expects marginal improvement in domestic prices in the near term. Owing to likely upside in CRIN and attractive valuation of EID, we remain positive on the stock. Maintain 'BUY'.

Sugar business drives the quarter

EID's consolidated revenue declined 26.7% YoY primarily on account of lower fertiliser volume in CRIN. EBITDA margin stood at 10.5% (up 150bps YoY, 980bps QoQ) and posted PAT of INR0.7bn (down 46.9% YoY). EBITDA and PAT were below estimates, predominantly due to CRIN's muted performance (EBITDA and PAT plunged 48.9% and 86.1% YoY, respectively).

Key highlights

- EID and its subsidiaries crushed 7.6mnMT cane in FY13 (up 10% YoY). However, company expects lower sugarcane crushing by 10%-12% in FY14.

- Bio-products business continues to perform well.

- Company expects sugar prices to move marginal upward in near term. EID is holding inventory of 0.13m in standalone business and expect to benefit from higher sugar prices.

Outlook and valuations: Attractive; maintain 'BUY'

Factoring in CRIN's lower profitability due to lower fertiliser volume and margin, we have revised downward our EPS estimate 14%/11% for FY14/15. We believe the stock is available at an attractive valuation of 7.3x/6.0x consolidated FY14E/15E P/E. We maintain 'BUY' with a revised target price of INR210/share (INR244 earlier) based on SOTP valuation

Source : Equity Bulls

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