Saral Gyan Hidden Gem Dec 2010

EQUITY RESEARCH REPORT

PICCADILY AGRO INDUSTRIES LTD. BSE CODE: 530305

Industry: 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 Serviceswww.saralgyan.in

An Independent Equity Research Firm

HIDDEN GEMS – DEC 2010

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TABLE OF CONTENT

S.No Content Page No.

1. Company Background 03

2. Recent Developments 04

3. Financial Performance 05

4. Charts & Graphs 07

5. Peer Group Comparison 09

6. Key Concerns 09

7. Saral Gyan Recommendation 10

8. Disclaimer 11



1. Company Background

Piccadily Agro Industries Ltd is an India-based company. The company's principal activity is to manufacture sugar and their by-products. They operate in two segments, namely sugar, 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 in Haryana. Piccadily Agro Industries Ltd was incorporated in the year 1994. Haryana State Investment Development Corporation and Piccadily Hotels Pvt Ltd and their associates promoted the company. They set up a new plant for the manufacture of white crystal sugar refined sugar with the installed capacity of 2500 TCD along with the facilities for co-generation of 6 MW power at Bhadson in Haryana.

During the year 2002-03, the company completed the erection of semi kesener and boiler and functioning from February 2002. During the year 2002-03, they expanded the crushing capacity from 2500 TCD to 5000 TCD at their plant in Bhadson, Haryana. The company started commercial production in their ENA unit with effect from April 28,2009.



2. Recent Developments

i) At the end of FY07, the company was only into sugarcane crushing and thus into the production 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 2.17 million cases. In that year the company made a net profit of just Rs 12 million but that was on account of 50 million loss from Sugar Division. At the end of FY08 the company had some 270 million capital work in progress, so they were still expanding their liquor facility.

iii) For FY09 the company sold 2.86 million cases with a turnover of 480 million. The company 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 a 70% increase in revenue for liquor unit over FY09. The company achieved a Profit before Tax of around 170 million from liquor unit and assuming 33% tax, a net profit of Rs 113.9 million, 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 Gross block 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



3. Financial Performance

Piccadily Agro Industries reports net profit of Rs 50.37 million in September 2010

Piccadily Agro Industries reported net profit of Rs 50.37 million in the quarter ended September 2010 as against profit of Rs 35.16 million during the previous quarter ended September 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 ended September 2009.

Piccadily Agro Industries net profit rises 52.58% in the June 2010 quarter

Net profit of Piccadily Agro Industries rose 52.58% to Rs. 59.2 million in the quarter ended June 2010 as against Rs 38.8 million during the previous quarter ended June 2009. 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

366.71324.81

294.55

707.7

494.32428.06

59.22 50.37

-23.94

35.1638.76 48.48

-100

0

100

200

300

400

500

600

700

800

Jun 09 Sep 09 Dec 09 Mar 09 Jun 10 Sep 10

Rs

in M

illi

on

s

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

1 2 3 4 5 6



Current & Expected Earnings:

Quarterly Ended Profit & Loss Account

Particulars (Rs in Millions)

Dec2009

Mar2010

Jun2010

Sep2010

Dec 2010E

Mar 2010E

Audited / UnAudited UA UA UA UA UA UA

Net Sales 294.55 707.7 494.32 428.06 486.45 587.88

Total Expenditure 224.1 607.9 390.44 342.07 351.21 501.45

PBIDT (Excl OI) 70.45 99.8 103.88 85.99 135.24 86.43

Other Income 1.06 2.53 2.16 6.69 4.67 3.44

Operating Profit 71.51 102.35 106.04 92.68 139.91 89.87

Interest 8.13 11.9 17.91 16.07 19.21 15.41

Exceptional Items 0 0 0 0 0 0

PBDT 63.4 90.45 88.13 76.61 120.7 74.46

Depreciation 14.92 13.6 14.88 15.95 18.5 13.42

Profit Before Tax 48.48 76.85 73.25 60.66 102.2 61.04

Tax 0 100.77 14.02 10.29 19.1 10.61

Provisions and contingencies 0 0 0 0 0 0

Profit After Tax 48.48 -23.94 59.22 50.37 83.1 50.43

Extraordinary Items 0 0 0 0 0 0

Prior Period Expenses 0 0 0 0 0 0

Other Adjustments 0 0 0 0 0 0

Net Profit 48.48 -23.94 59.22 50.37 83.1 50.43

Equity Capital 235.85 235.85 235.85 235.85 235.85 235.85

Face Value (IN RS) 10 10 10 10 10 10

Reserves

Calculated EPS 2.06 -1.02 2.51 2.14 3.52 2.14

Calculated EPS (Annualised) 8.22 -4.06 10.04 8.54 14.09 8.54

No 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 withsugar 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.



4. Charts & Graphs

i) Share Price Moving Average:

Piccadily Agro Industries Ltd is currently trading near to its 50 days and above its 200 days price moving average.

ii) Comparative Graph:

Piccadily Agro Industries has outperformed all indices and gave returns of 108.4% in last one year.



iii) 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.



5. Peer Group Comparison

PEER GROUPPiccadily

AgroEmpee Sugars

Jeypore Sugars

Kesar Enterprises Oudh Sugar

CMP 35.95 64.95 161.25 58.65 39.1552 W H/L 53.80/12.55 83.90/19.20 358/141.25 41.10/151.55 84.80/32.00Market Cap 847.87 2726.14 731.19 398.24 1014.68

Results (in Mn) 10-Sep 10-Sep 10-Jun 10-Sep 10-JunSales 428.06 691.9 444.77 410.73 1406.74PAT 50.37 118.61 -131.37 -184.75 -342.51Equity 235.85 419.7 45.35 67.9 260.45EPS 5.69 3.83 -25.1 -23.04 -43.67

P/E 6.32 16.98 0 0 0

6. 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.



7. Saral Gyan Recommendation

i) At the end of Sep'10 the Management holds 68.89% equity stake in the company which is very good by any standards.

ii) Over the last 2 years the Management has increased their stake by almost 10%. At the end of Dec'08 they had 59.18% stake in the company while at present they hold 68.89% stake. The Promoter's made open market purchase as recently as May'10.

iii) For the half year ending Sep'10, the company has recorded a more than 100% growth on YOY basis. The company is trading at a forward earnings PE multiple of 3.5 while the other 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 same liquor 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 yield works 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 book value is 1.36. The scrip is trading at 3.5 X FY 2010-11 estimated earnings which make it an attractive buy at current market price.

Saral Gyan Team recommends “BUY” for Piccadily Agro Industries Ltd. at current market price of 35.95 for a target of Rs. 75 over a period of 18-24 months.



8. 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 SERVICES

This document prepared by our research analysts does not constitute an offer or solicitation for the 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 be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in 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.

Saral Gyan Hidden Gem Dec 2010

Economy & Finance

Transcript of Saral Gyan Hidden Gem Dec 2010