*MUMBAI : *Punjab-based Lakshmi Energy and Foods Ltd (BOM:519570) is assigned ‘good’ fundamentals relative to other listed entities in India.
India’s leading credits ratings agency, CRISIL has assigned CRISIL IER fundamental grade of 3/5 to the company. The ratings agency has assigned a valuation grade of 5/5, indicating that there is a ‘strong upside’ from the current market price of Rs.102 (as on May 31, 2010). According to a statement issued by the ratings agency, Lakshmi Energy and Foods has evolved as a fully integrated rice miller boasting a presence across the entire value chain of rice milling. CRISIL Equities expects Lakshmi’s revenues to grow at a two-year CAGR of 46% to Rs.15 bn in FY11. EBITDA and net profit margins are estimated to decline by 1,120 bps and 390 bps over the next two years to 20.4% and 9.3% respectively in FY11, primarily on account of lower power realisations and higher raw material costs. CRISIL Equities expects EPS to increase to Rs.22.0 in FY11 from Rs.14.5 in FY09. We expect RoE of 18.8% in FY11 vs. 17.8% in FY09. As a de-risking strategy, the company entered the high-margin basmati rice segment in FY09 (year ended September). It plans to enter the branded basmati segment in September 2010. The assigned fundamental grade reflects Lakshmi’s dominant position in agriculturally-rich Punjab, which accounts for 11% of India’s rice production and 50% of basmati area under cultivation. The grade takes into account the management’s vast experience in the rice industry and their intention of transforming the company into a professionally-run organisation. Lakshmi’s management established India’s largest biomass (husk-based) power plant of 30 MW thanks to which the company has the highest EBITDA margin in the rice industry. However, our grade is moderated by Lakshmi’s dependence on the Food Corporation of India (FCI) for sale of non-basmati rice, which exposes the company to erratic volumes. Although the company intends to reduce exposure in this segment, we expect revenue contribution of about 40% in the near term. Government intervention in the rice industry and vagaries of nature further temper the grade. The grade also factors in independent directors’ limited awareness about the company’s operations. -- Regards Hardik Shah -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
