The Jeypore Sugar Company Ltd - NSE

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Q1FY12 Result Update

The Jeypore Sugar Company Ltd


Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process –

Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental

grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The

valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to

grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade

Assessment CRISIL Valuation Grade

Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (- 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

Analyst Disclosure

Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest

that can bias the grading recommendation of the company.

Additional Disclosure

This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

Disclaimer:

This Exchange-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL

(Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for

any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without

any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes

investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold

any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this

Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be

reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially outside India or

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© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 1

The Jeypore Sugar Company Ltd Strong revenue growth Fundamental Grade 2/5 (Moderate fundamentals)

Valuation Grade 2/5 (CMP has downside)

Industry Food products

Fair Value Rs 110 CMP Rs 125

August 05, 2011

The Jeypore Sugar Company Ltd’s (Jeypore Sugar’s) results were broadly in

line with CRISIL Research’s expectations. Q1FY12 revenues increased by 40%

y-o-y as the company liquidated the inventory built up in Q4FY11. The new

plant at Pothavaram, Andhra Pradesh does not seem to have commenced

production as the depreciation levels remained flat y-o-y. We have not been

able to confirm from the management about production in Q4FY11, cost of

production and the details of commissioning of its new plant. We expect sugar

prices to remain firm at Rs 28-29 per kg in H2 of SS2010-11 (October 2010 to

September 2011). and at Rs 27-30 per kg in SS2011-12 (October 2011 to

September 2012). We maintain our earnings estimates and the fundamental

grade of 2/5.

Q1FY12 result analysis

• Revenues increased 40% y-o-y and 10% q-o-q to Rs 757 mn as the

company liquidated its inventory built up during Q4FY11. The inventory at

Q4FY11-end was 32% higher than that at Q4FY10-end.

• EBITDA margin expanded from 0.1% in Q1FY11 to 8.0% in Q1FY12 due to

higher realisations.

• The depreciation of the company remained stagnant at Rs 15 mn indicating

that the Pothavaram plant was not commissioned during this quarter.

• The interest expenses increased 37% y-o-y on account of higher interest

rates. However, it declined 12% q-o-q indicating that the company might

have repaid certain portion of its debt.

• The net loss of the company declined from Rs 70 mn in Q1FY11 to Rs 30

mn in Q1FY12.

Valuations: Current market price has downside We continue to use the P/BV method to value Jeypore Sugar. We have

assigned P/BV multiple of 0.7x and maintain our fair value of Rs 110 per share.

KEY FORECAST

(Rs mn) FY08 FY09 FY10 FY11# FY12E

Operating income 1,944 1,792 2,420 2,105 3,568

EBITDA 204 364 614 241 691

Adj PAT (75) (7) 192 (92) 66

Adj EPS-Rs (16.6) (1.5) 42.3 (20.4) 14.5

EPS growth (%) NM NM NM NM NM

Dividend yield (%) 0.7 1.3 3.1 - -

RoCE (%) 4.3 8.9 15.3 3.5 12.4

RoE (%) NM NM 29.1 NM 9.5

P/E (x) NM NM 4.5 NM 8.7

P/BV (x) 1.4 0.7 1.2 0.9 0.8

EV/EBITDA (x) 12.6 7.6 5.8 14.8 4.8

#FY11 numbers are based on abridged financials

NM: Not meaningful; CMP: Current market price

Source: Company, CRISIL Research estimate

CFV MATRIX

KEY STOCK STATISTICS NIFTY 5332

NSE JEYPORE

Face value (Rs per share) 10

Shares outstanding (mn) 4.5

Market cap (Rs mn)/(US$ mn) 569/13

Enterprise value (Rs mn) /(US$ mn) 3,553/80

52-week range (Rs) (H/L) 240/97

Beta 0.97

Free float (%) 55.2

Avg daily volumes (30-days) 329

Avg daily value (30-days) (Rs mn) 0

SHAREHOLDING PATTERN

PERFORMANCE VIS-À-VIS MARKET

Returns

1-m 3-m 6-m 12-m

JEYPORE 8% 6% -16% -38%

NIFTY -6% -4% -1.2% -2.5%

ANALYTICAL CONTACT Chetan Majithia (Head) [email protected]

Suresh Guruprasad [email protected]

Onkar Kulkarni [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

Fundam

enta

l G

rade

Poor Fundamentals

ExcellentFundamentals

Str

ong

Dow

nsi

de

Str

ong

Upsi

de

44.8% 44.8% 44.8% 44.8%

0.8% 0.8% 0.7% 0.7%

54.5% 54.5% 54.5% 54.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep-10 Dec-10 Mar-11 Jun-11

Promoter DII Others



Q1FY12 Result Summary (Rs mn) Q1FY12 Q4FY11 Q1FY11 q-o-q (%) y-o-y (%)

Net sales 757 691 541 10% 40%

Raw materials cost 605.1 1.6 485.9 38224% 25%

Raw materials cost (% of net sales) 79.9% 0.2% 89.8% 7,968bps (994)bps

Employee cost 29.7 106.8 24.3 -72% 22%

Other expenses 61.7 338.8 30.3 -82% 104%

EBITDA 60.7 243.4 0.3 -75% NM

EBITDA margin 8.0% 35.2% 0.1% (2,722)bps 796bps

Depreciation 15 60 15 -74% 3%

EBIT 45 184 -15 -75% NM

Interest and finance charges 76 86 56 -12% 37%

Operating PBT -31 97 -70 -132% NM

Other Income 1.1 1.4 0.5 -23% 131%

Extraordinary Income/(expense) 0 0 0 NM NM

PBT -30 99 -70 -130% NM

Tax 0 -22 0 NM NM

PAT -30 121 -70 NM NM

Adj PAT -30 121 -70 NM NM

Adj PAT margin -3.9% 17.5% -12.9% NM NM

No of equity shares (mn) 5 5 5 - -

Adj EPS (Rs) -6.6 26.7 -15.4 NM NM

Source: Company, CRISIL Research

Sale and EBITDA margin PAT and PAT margin

Source: Company, CRISIL Research Source: Company, CRISIL Research

Share price movement Fair value since initiation

-indexed to 100

Source: NSE, CRISIL Research Source: NSE, CRISIL Research

644 609 333 541

445

432691 757

22%26%

70%

0%

-14.9%

14%

35%

8%

-20%

-10%

0%

10%

20%

30%

40%

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60%

70%

80%

0

100

200

300

400

500

600

700

800

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

(Rs mn)

Net Sales EBITDA Margin (RHS)

80 76 12

-70

-131

-12

121

-30

12% 12%

3%

-13%

-30%

-3%

18%

-4%

-40%

-30%

-20%

-10%

0%

10%

20%

-150

-100

-50

0

50

100

150

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

(Rs mn)

PAT PAT Margin (RHS)

0

50

100

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350

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

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Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Jeypore NIFTY

0.0

0.5

1.0

1.5

2.0

2.5

3.0

20

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Dec-10

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Apr-11

Apr-11

May-11

Jun-11

Jun-11

Jul-11

Jul-11

('000)(Rs)

Traded Quantity (RHS) CRISIL Fair Value Jeypore

Strong growth in

sales - up 40% y-o-y



VALUATION

We continue to value Jeypore Sugar using the P/BV method. We assign P/BV

multiple of 0.7x to FY12E book value of Rs 159 and maintain our fair value of

Rs 110 per share. Our valuation grade is 2/5.

One-year forward P/B band One-year forward EV/EBITDA band


P/B – premium/discount to NIFTY P/B movement


CRISIL IER reports released on The Jeypore Sugar Company Ltd

Date Nature of report

Fundamental

grade Fair value

Valuation

grade

CMP

(on the date of report)

02-Dec-10 Initiating coverage* 2/5 Rs 152 3/5 Rs 167

21-Feb-11 Q3FY11 result update 2/5 Rs 152 3/5 Rs 154

09-June-11 Q4FY11 result update 2/5 Rs 110 3/5 Rs 100

05-Aug-11 Q1FY12 result update 2/5 Rs 110 2/5 Rs 125

* For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

0

50

100

150

200

250

300

350

400

450

Mar-07

Jul-07

Oct-07

Jan-08

Apr-08

Aug-08

Nov-08

Feb-09

May-09

Sep-09

Dec-09

Mar-10

Jun-10

Oct-10

Jan-11

Apr-11

Jul-11

(Rs)

Jeypore 0.5x 1x 1.5x 2x 2.5x

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Mar-07

Jul-07

Oct-07

Jan-08

Apr-08

Aug-08

Nov-08

Feb-09

May-09

Sep-09

Dec-09

Mar-10

Jun-10

Oct-10

Jan-11

Apr-11

Jul-11

(Rs mn)

Jeypore 3x 5x 7x 9x

-98%

-96%

-94%

-92%

-90%

-88%

-86%

-84%

-82%

-80%

-78%

-76%

Mar-07

Jul-07

Oct-07

Jan-08

Apr-08

Aug-08

Nov-08

Feb-09

May-09

Sep-09

Dec-09

Mar-10

Jun-10

Oct-10

Jan-11

Apr-11

Jul-11

Premium/Discount to NIFTY Median premium/discount to NIFTY

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Mar-07

Jul-07

Oct-07

Jan-08

Apr-08

Aug-08

Nov-08

Feb-09

May-09

Sep-09

Dec-09

Mar-10

Jun-10

Oct-10

Jan-11

Apr-11

Jul-11

1yr Fwd PB (x) Median PB

+1 std dev

-1 std dev

We maintain the fair

value of Rs 110



FINANCIALS

#FY11 numbers are based on abridged financials

Note: All ratios are computed on Adj PAT

Source: Company, CRISIL Research estimate

Income statement Balance Sheet(Rs mn) FY08 FY09 FY10 FY11# FY12E (Rs mn) FY08 FY09 FY10 FY11# FY12E

Operating income 1,944 1,792 2,420 2,105 3,568 Liabilities

EBITDA 204 364 614 241 691 Equity share capital 45 45 45 45 45

EBITDA margin 10.5% 20.3% 25.4% 11.4% 19.4% Reserves 498 528 700 612 677

Depreciation 113 117 112 111 225 Minorities - - - - -

EBIT 91 247 502 130 466 Net worth 544 573 745 657 723

Interest 177 250 233 249 379 Convertible debt - - - - -

Operating PBT (86) (3) 269 (119) 86 Other debt 1,990 2,424 2,836 3,167 2,967

Other income 5 8 5 5 8 Total debt 1,990 2,424 2,836 3,167 2,967

Exceptional inc/(exp) 14 36 1 - - Deferred tax liability (net) 116 125 117 95 95

PBT (67) 41 275 (115) 94 Total liabilities 2,649 3,123 3,699 3,919 3,785

Tax provision (5) 12 82 (22) 28 Assets

Minority interest - - - - - Net fixed assets 1,446 1,384 1,330 1,219 3,483

PAT (Reported) (61) 29 193 (92) 66 Capital WIP 1,226 1,848 2,189 2,619 130

Less: Exceptionals 14 36 1 - - Total fixed assets 2,672 3,233 3,519 3,838 3,613

Adjusted PAT (75) (7) 192 (92) 66 Investments 2 2 2 2 2

Current assetsRatios Inventory 1,915 1,708 1,574 2,077 2,564

FY08 FY09 FY10 FY11# FY12E Sundry debtors 79 92 38 130 220

Growth Loans and advances 476 495 433 610 1,033

Operating income (%) NM NM 35.0 (13.0) 69.5 Cash & bank balance 172 71 124 183 245

EBITDA (%) NM 78.5 68.6 NM 186.7 Marketable securities - - - - -

Adj PAT (%) NM NM NM NM NM Total current assets 2,642 2,366 2,169 2,999 4,062

Adj EPS (%) NM NM NM NM NM Total current liabilities 2,682 2,487 1,995 2,924 3,896

Net current assets (41) (121) 174 75 166 Profitability Intangibles/Misc. expenditure 16 8 4 4 4

EBITDA margin (%) 10.5 20.3 25.4 11.4 19.4 Total assets 2,649 3,123 3,699 3,919 3,785

Adj PAT Margin (%) NM NM 7.9 NM 1.8

RoE (%) NM NM 29.1 NM 9.5 Cash flow

RoCE (%) 4.3 8.9 15.3 3.5 12.4 (Rs mn) FY08 FY09 FY10 FY11# FY12E

RoIC (%) 5.4 9.5 13.5 4.6 12.8 Pre-tax profit (81) 5 274 (115) 94

Total tax paid (1) (2) (90) (0) (28)

Valuations Depreciation 113 117 112 111 225

Price-earnings (x) NM NM 4.5 NM 8.7 Working capital changes 352 (20) (242) 158 (29)

Price-book (x) 1.4 0.7 1.2 0.9 0.8 Net cash from operations 383 100 54 154 262

EV/EBITDA (x) 12.6 7.6 5.8 14.8 4.8 Cash from investments

EV/Sales (x) 1.3 1.5 1.5 1.7 0.9 Capital expenditure (1,241) (671) (394) (430) -

Dividend payout ratio (%) NM 18.2 13.7 - - Investments and others - - (0) - -

Dividend yield (%) 0.7 1.3 3.1 - - Net cash from investments (1,241) (671) (394) (430) -

Cash from financing

B/S ratios Equity raised/(repaid) - - - - -

Inventory days 415 460 330 407 327 Debt raised/(repaid) 858 434 413 331 (200)

Creditors days 555 626 390 546 468 Dividend (incl. tax) (5) (5) (26) - -

Debtor days 14 19 6 23 23 Others (incl extraordinaries) 25 42 7 4 (0)

Working capital days (7) (41) (11) (5) (10) Net cash from financing 878 471 393 335 (200)

Gross asset turnover (x) 0.9 0.8 1.0 0.9 1.0 Change in cash position 21 (100) 53 59 62

Net asset turnover (x) 1.4 1.3 1.8 1.7 1.5 Closing cash 172 71 124 183 245

Sales/operating assets (x) 0.9 0.6 0.7 0.6 1.0

Current ratio (x) 1.0 1.0 1.1 1.0 1.0 Quarterly financials

Debt-equity (x) 3.7 4.2 3.8 4.8 4.1 (Rs mn) Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12

Net debt/equity (x) 3.3 4.1 3.6 4.5 3.8 Net sales 541 445 432 691 757 Interest coverage 1.2 1.5 2.6 1.0 1.8 Change (q-o-q) 62% -18% -3% 60% 10%

EBITDA 0.3 (66) 63 243 61

Per share Change (q-o-q) -100% NM NM 289% -75%

FY08 FY09 FY10 FY11# FY12E EBITDA margin 0% -15% 14% 35% 8%

Adj EPS (Rs) (16.6) (1.5) 42.3 (20.4) 14.5 PAT (70) (131) (12) 121 (30)

CEPS 8.2 24.2 67.0 4.1 64.1 Adj PAT (70) (131) (12) 121 (30)

Book value 119.9 126.4 164.3 144.9 159.4 Change (q-o-q) NM NM NM NM -125%

Dividend (Rs) 1.2 1.2 5.8 1.2 - Adj PAT margin -12.9% -29.5% -2.9% 17.5% -3.9%Actual o/s shares (mn) 4.5 4.5 4.5 4.5 4.5 Adj EPS (15.4) (29.0) (2.7) 26.7 (6.6)


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