Sanwaria Agro - KRC

8/8/2019 Sanwaria Agro - KRC

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India Equity Research |Edible Oil Result Update (MidCap)

Sanwaria Agro Oils Ltd. INR: 57

Realizations drive sales northwards HOLD

Price Outlook (INR): 63

Market Data Jan 18’ 2010

Shares outs (Cr) 17.4

Equity Cap (Rs. Cr) 17.4

Mkt Cap (Rs. Cr) 991.8

52 Wk H/L (Rs) 98.0 / 14.8

Avg Vol (1yr avg) 5,529

Face Value (Rs) 1.0

Bloomberg Code SAO IN

Market Info:

SENSEX 17,641

NIFTY 5,275

Price Performance

0

50

100

150

200

250

300

350

400

J a n - 0 9

F e b - 0 9

M a r - 0 9

A p r - 0 9

M a y - 0 9

J u n - 0 9

J u l - 0 9

A u g - 0 9

S e p - 0 9

O c t - 0 9

N o v - 0 9

D e c - 0 9

J a n - 1 0

Sanwaria Agro SENSEX

Share Holding pattern (%)

Particulars Jun-09 Mar-09 Chg

Promoters 70.0 70.0 0.0

MF/Ins. Co. 0.0 0.0 0.0FIIs 0.4 0.5 (0.1)

BodiesCorporate

25.4 25.4 0.0

Public 4.2 4.1 0.1

Total 100.0 100.0

Source: BSE

Q3FY10 Results above our estimates - Net sales increased 24% y-o-y (8% q-o-q) to Rs. 333.5

crore. EBITDA improved by 190% y-o-y to Rs. 15.5 crore and net profit improved by 171% y-o-y

to Rs. 9.3 crore. Better realizations for de-oiled cake and refined soyabean oil led to

improvement in sales and margins.

Increase in net sales y-o-y was mainly driven by improvement in realization of De-oiled cakes

(DOC) by 47% y-o-y, refined oil by 12% y-o-y. Volumes, however declined by 23% y-o-y. As

prices of soyabean surged (12%) in the domestic market, price of DOC increased by 23%.

Consequently demand for DOC declined from India (Asia’s largest exporter) and shifted to

South America.

Operating profit improved 190% y-o-y on the back of improvement in realization. OPM

improved by 266bps y-o-y to 4.6% during Q3FY10.

Net Profit increased 171% y-o-y to Rs. 9.3 crore and NPM improved by 151bps y-o-y to 2.8% on

account of operating leverage.

Other developments – Sanwaria Agro Oils Ltd. (SAOL) has entered into an arrangement with

Hariyali Kissan Bazar (M/s DCM Shriram Consolidated Ltd.) for marketing of its premium brand

of soya edible oil "NARMADA" on all India basis. This along with its earlier tie-ups with VishalRetail, Big Bazaar & ITC Chaupals will help SAOl in increasing its retail presence and thereby

help in improving its branded sales.

Branded sales have been increasing its contribution to the top line (from 2% of total sales in

FY08 to 5% in FY09) and SAOL expects to contribute ~20% to top line in next 2 years.

Valuations & Views – According to SOPA soybean output in India is expected at 9.73 mn. T

during the oil year 2009-10 (Oct. – Sep) compared to 9.3 mn. T in the previous year. With

prices of soyabean in the domestic market increasing, prices of refined oil and DOC have also

increased. SAOL, a leading solvent extraction company is likely to benefit from this increase.

However, since Q3 is the peak year for procurement of raw material (seeds), working capital

requirements have gone up and so with higher cost raw material, pressure on margins is likely

to be there in FY11E. SAOL’s initiative to tie up with retail chains for selling refined soybean

oil would help in utilizing the capacities further. With this, we maintain our ‘HOLD’recommendation on the stock with a target price of Rs. 63 giving an upside potential of 12%

from its current levels. At the CMP of Rs. 57 the stock is trading at 15.4x FY11E EPS of Rs. 3.7.

On peer comparison, SAOL is trading at higher P/E based on FY11E as it has presence in only

soyabean oil and majority of its revenues come from DOC (having higher margins) compared to

refined oil.

Key Financials Rs.

Crore

Particulars FY08 FY09 FY10E FY11E

Sales 938.1 1111.0 1155.5 1259.4

EBITDA 72.4 82.1 80.9 94.5

PAT 43.3 53.3 57.8 63.0

EPS 2.5 3.1 3.4 3.7

OPM 7.7% 7.4% 7.0% 7.5%

NPM 4.6% 4.8% 5.0% 5.0%

P/E 22.8 18.6 16.8 15.4

P/BV 4.1 6.6 4.9 3.8

RoE 37% 35% 28% 24%

RoCE 22% 25% 18% 18%

Source: Company Data, KRC Estimates

Analyst :Neha [email protected]

℡ 91-22-6696 5572

www.krchoksey.com



Sanwaria Agro Oils Ltd.

2 KRC Equity Research

Net sales

55%

34%

-34% -48% -1%

24%

85%

0

100

200

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J u n 0 8 Q

S e p 0 8 Q

D e c 0 8 Q

M a r 0 9 Q

J u n 0 9 Q

S e p 0 9 Q

D e c 0 9 Q

R s .

C r o r e

-50%

0%

50%

100%

Net Sales y-o-y Growth%

Source: Company Data, KRC Research

Volume & Realization

Volume Sold - Ref. Soyabean Oil (MT)

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12000

Mar09Q Jun09Q Sep09Q Dec09Q

T o n n e s

-100%

-50%

0%

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Ref. Soyabean oil y-o-y (%) q-o-q (%)

Volume - DOC (MT)

0

20000

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80000

100000

120000


-100%

-50%

0%

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100%

150%

200%

De-oiled cakes(Tonnes) y-o-y (%) q-o-q (%)

Avg. Realization - Ref. soyabean oil

42000

44000

46000

48000

50000

Mar09Q J un 09Q Se p09Q De c09Q

-30%

-20%

-10%

0%

10%

20%

Ref. Soyabean oil y-o-y (%) q-o-q (%)

Avg. Realization - DOC (Rs./MT)

0

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-20%

0%

20%

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60%

80%

De-oiled c akes y-o-y (%) q-o-q (%)






Segment wise revenue (Rs.Crore)

Particulars Jun08Q Sep 08Q Dec08Q Mar 09Q Jun09Q Sep09Q Dec09Q

Sales Break-up 274.3 312.2 268.0 256.4 143.0 308.1 329.9

Solvent Extraction & Refining 272.3 310.1 267.5 255.8 140.9 306.1 329.5

Power Generation 2.1 2.1 0.5 0.7 2.1 1.9 0.4

Less: Inter Segment Transfer 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Segment Revenue 274.3 312.2 268.0 256.4 143.0 308.1 329.9

Segmental Break-up 28.5 27.2 7.6 17.1 14.7 19.9 14.0

Solvent Extraction & Refining 27.0 25.6 7.1 16.4 12.6 18.5 14.2

Power Generation 1.5 1.6 0.5 0.7 2.1 1.4 -0.2

Interest 3.6 0.9 2.5 4.8 2.7 3.5 3.4

other un-allocable exp. (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PBT 24.9 26.2 5.1 12.3 12.0 16.4 10.6


Operating Profit & Net Profit

0

5

10

15

20

25

30

35

J u n 0 8 Q

S e p 0 8 Q

D e c 0 8 Q

M a r 0 9 Q

J u n 0 9 Q

S e p 0 9 Q

D e c 0 9 Q

R s .

C r o r e

0%

2%

4%

6%

8%

10%

12%

Operating Profit PAT OPM NPM






Q3FY10 Result (Rs Crore)

Particulars Q3FY10 Q3FY09 y-o-y Q2FY10 q-o-q Comments

Net Sales 333.5 268.0 24% 309.0 8%Improved Realizations from DOC and ref. soyabean

oil lead to increase in sales

Expenditure 318.0 262.7 21% 287.6 11%

Consumption of Materials / Purchase 302.7 239.6 26% 275.5 10%

(Increase) / Decrease In Stocks -5.6 -1.1 389% -9.6 -42%

Staff Cost 1.0 0.9 12% 0.9 11%

Other Manufacturing Expenses 0.0 9.5 0.0

Other Expenditure 19.9 13.8 44% 20.8 -5%

Operating Profit 15.5 5.3 190% 21.4 -27% Improved realizations increased operating profit

Other Income 0.0 3.7 0.0

Interest 3.4 2.5 37% 3.5 -3%

Depreciation 1.5 1.4 7% 1.5 2%

PBT 10.6 5.1 107% 16.4 -35%

Provision for Tax 1.3 1.7 -23% 2.3 -45%

PAT 9.3 3.4 171% 14.0 -34%

Lower tax provisioning and better operating

leverage improved net profit

EPS 0.5 0.2 171% 0.8 -34%

Margins

OPM 4.6% 2.0% 266 bps 7% -226 bps

EBIT 3.2% 1.9% 127 bps 5% -213 bps

NPM 2.8% 1.3% 151 bps 5% -176 bps






Annexure

De-oiled Cakes (Rs./Tonne)

10000

15000

20000

25000

J a n

F e b

M a r

A p r

M a y

J u n

J u l

A u g

S e p

O c t

N o v

D e c

D O C P r i c e s ( R s . / T )

2008 2009 2010

Source: Bloomberg, KRC Research

Ref. Soybean Oil Prices – Spot (Rs./MT)

300

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550

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650

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750

J a n

F e b

M a r

A p r

M a y

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S e p

O c t

N o v

D e c

R e f . s o y a b e a n o i l ( M u m b a i )

( R s . /

T )

2008 2009 2009

Source: Bloomberg, KRC Research





Rajiv Choksey Co-Head Institutional Equities [email protected] +91-22-66535135

Anuj Choksey Co-Head Institutional Equities [email protected] +91-22-66965500

Maulik Patel Head Research [email protected] +91-22-66965574

SAOL RatingLegend

Our Rating Upside

Strong Buy Morethan25%

Buy 15%-25%

Hold 10%-15%

Reduce Nil–10%

Sell Lessthan0%

Other Stocks in the sector under our active coverage: FMCG

Ticker Company Recommendation As of Return Bmk Outper BARR

CLGT IN Colgate-Palmolive India Ltd reduce 11/03/09 14.46% 30.01% -15.55%

NEST IN Nestle India Ltd hold 11/03/09 0.00% 25.61% -25.61%

TT IN Tata Tea Ltd buy 10/29/09 67.11% 39.40% 27.70% 2nd

SKB IN GSK Consumer Healthcare Ltd hold 10/26/09 13.45% 71.22% -57.77%

ITC IN ITC Ltd hold 10/23/09 10.51% 17.69% -7.18%

SAO IN Sanwaria Agro Oils Ltd hold 10/15/09 188.15% 188.15% 0.00% 1st

RDSD IN Riddhi Siddhi Gluco Biols Ltd hold 08/12/09 -60.85% 31.00% -91.86%

HUVR IN Hindustan Unilever Ltd hold 07/30/09 0.00% 1.29% -1.29%

0

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J a n - 0 9

F e b - 0 9

M a r - 0 9

A p r - 0 9

M a y - 0 9

J u n - 0 9

J u l - 0 9

A u g - 0 9

S e p - 0 9

O c t - 0 9

N o v - 0 9

D e c - 0 9

J a n - 1 0

HOLD HOLD

HOLD





Disclaimer:

This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a

security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to satisfy

themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the

authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same.

Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors

when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey

Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale

thereof while this report is in circulation.

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Kisan Ratilal Choksey Shares and Securities Pvt .Ltd. Registered Office:

1102,Stock Exchange Tower, Dalal Street, Fort, Mumbai–400001.

Phone: 91-22-66335000; Fax: 91-22-66338060.

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Sanwaria Agro - KRC