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EID Parry Q1FY13: Sugar segment sweetens performance

Edelweiss | Published: 03 Aug, 2012  | Source : | Follow Author | Add to my Favourites

EID Parry’s (EID) Q1FY13 revenue and adjusted PAT were in line. EBITDA margin expanded 10.8% even as the adjusted PAT at Rs782mn is substantially higher than Rs314mn YoY. This was on account of robust volume of sugar and better operating leverage. Moreover, the recent sugar price increase by ~20% over the past one month, owing to demand picking up ahead of the festival season and monsoon concerns, is likely to augur well for EID. Over the last one quarter, EID has closed the discounting gap with Coromandel from 35% in April 2012 to 15% currently. However, owing to the improving sugar segment performance coupled with the likely upside in Coromandel International translating into higher valuation, Edelweiss remains positive on the stock. Maintain ‘BUY’.

Revenue, adjusted PAT in line, sugar performance improves

EID posted a consolidated revenue growth of 8.6%, EBITDA margin of 10.8% (up 160 bps YoY and 180 bps QoQ) and adj. PAT of Rs782mn (up 149%) in line with the expectation. The strong growth in profitability is primarily on account of an improved performance in the sugar segment which expanded PBIT margin by 830 bps YoY to 1.1% in Q1FY13.

Key highlights – sugar prices shoot up over the past one month

- While the free sale sugar price for EID was at Rs27.5/kg in Q1FY13, sugar price in general has shot up by about 20% over the past one month to Rs34/kg currently, owing to concerns over monsoon and an incremental demand coming ahead of the festive season. This is likely to augur well for the profitability of EID.

- EID and its subsidiaries crushed 1.82mn MT cane in Q1FY13 (up 19% YoY) vis-à-vis 1.52mn MT in Q1FY12 and 2.69mn MT in Q4FY12. Sugar sales volume was 0.22mn MT on a consolidated basis during Q1FY13(0.16mn MT YoY), out of which, 94,337 MT was exported. Management guides for ~67,000 MT of exports for Q2FY13.

- Management guides for ~8mn MT cane crushing in FY13 vs 6.9mn MT in FY12.

Outlook and valuations: Attractive; maintain ‘BUY’

Factoring in a higher sugar realization, Edelweiss has increased their EPS estimates by 6.8% and 4.4% for FY13 and FY14 respectively. EID is currently available at an attractive valuation of 6.9x and 5.8x consolidated P/E for FY13E and FY14E respectively. Edelweiss maintains ‘BUY’ with a revised target price of Rs301/share (Rs295 earlier).

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