Over 10% growth in both revenue and profit in Q3: KRBL (One of the largest Basmati exporters in India)
Update on Indian Equity Market:
Indian markets closed the week with muted gains on Friday. Nifty closed the day 12 points higher at 12,272. The best performers within the index were TITAN (3.5%), TATASTEEL (3.4%) and UPL (3.1%) whereas Vedanta (-2.7%), KOTAKBANK (-2.0%) and TATAMOTORS (-1.5%) were the worst performers. Within the sectoral index, PSU BANK (2.3%), MEDIA (1.2%) and METAL (0.6%) led the gains while AUTO (-0.4%), PHARMA (-0.3%) and FMCG (-0.1%) were the laggards.
Key takeaways from the interview of Mr Anil Mittal, Chairman and Managing Director, KRBL Ltd; dated 20th December 2019.
About the promoter shareholding in the company, Mr Mittal mentioned that the promoters intend to increase the shareholding to 63-64% from current levels of 58.8%. The promoters have bought 450,000 shares from the open market recently. However, he added that it also depends on the price of the stock.
In 2Q, the results were lower than expectations. This was because of an order worth 32,000 tonnes of rice were stuck at the ports on account of delay of LCs. He mentioned that the company has shipped all the material in 3Q. Despite the slowdown, he is confident of having robust 3Q. He highlighted that the management is expecting the revenue and profit to grow more than 10% in the 3QFY20E.
There was one case in which the Enforcement Directorate froze one of the properties valued at about ₹ 150 mn. This case has come before the High Court and it will take 2-3 years to finalize this issue. The total amount involved is ₹150 mn. He is confident that the verdict will be in the company’s favour. It will come through a legal process.
In terms of the brands, the company’s flagship brand, India Gate, is in great demand in the international market as well as in Domestic market. In the category of India Gate classic, there is virtually no competition for this SKU. This particular brand is fetching the highest price in the entire world, including India. Five years ago, the company developed a new brand called Unity to exclusively cater to middle-class families. This brand has picked up momentum and is doing well, much beyond the company’s expectations.
Iran has been a concern for the company since last 6-7 months in terms of payments and orders. There has been no demand from the country for last 4 months. For the orders previously received and executed, the payments are stuck and exporters are having a hard time. However, the company expects that this market will open up by the first week of January.
Consensus Estimate (Source: market screener website)
The closing price of KRBL was ₹ 281/- as of 20-December-19. It traded at 11x/ 10x the
consensus EPS estimate for FY20E/ FY21E of ₹ 25.2/ 29.3 respectively.
Consensus target price of for KRBL is not available.