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LEAF: Itís about integration - Views on News from Equitymaster
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LEAF: Itís about integration
Apr 23, 2008

Performance summary
  • Topline grows by 51% YoY and 37% YoY for 4QFY08 and FY08 respectively.
  • EBITDA margin expands by 4.3% YoY for FY08 on account of lower expenses (as percentage of sales).

  • Margin expansion aided by lower tax outgo enables the bottomline to grow by 67% YoY in FY08.

(Rs m) 4QFY07 4QFY08 (%) Change FY07 FY08 (%) Change
Net sales 2,050 3,097 51.1% 6,963 9,545 37.1%
Expenditure 1,716 2,494 45.4% 5,795 7,536 30.0%
Operating profit (EBDITA) 334 603 80.4% 1,167 2,009 72.1%
EBDITA margin (%) 16.3% 19.5% 16.8% 21.0%
Other income 10 11 8.1% 21 24 14.3%
Interest 18 129 612.2% 45 309 585.6%
Depreciation 88 38 -56.9% 122 194 59.4%
Profit before tax 238 447 87.5% 1,021 1,530 49.8%
Tax 74 106 43.2% 418 521 24.8%
Profit after tax/(loss) 164 341 107.4% 603 1,009 67.2%
Net profit margin (%) 8.0% 11.0% 8.7% 10.6%
No. of shares (m) 57.2 60.0 57.2 60.0
Diluted earnings per share (Rs)* 16.8
Price to earnings ratio (x)* 12.9

What has driven performance in FY08?
  • Lakshmi Energy and Foods (LEAF) witnessed a topline growth of 37% YoY in FY08. On account of addition of paddy processing capacity, the volumes have witnessed strong growth. Also, the realisations were on the higher side. While rice volumes grew by 22% YoY, the realisations were up 11% YoY to Rs 13,476/MT.

    % growth (YoY) Volumes Realisations
    Rice 21.9 11
    Nakku 109.7 4.1
    Rice Bran Oil 40.2 26.3
    De-Oiled Cakes 15.3 32.9
    Cattle Feed 35.6 21.5
    Paddy Husk 23.5 4.5

  • Nakku volume sales were up 110% YoY, while that of rice bran oil and deoiled cake were up 40% and 15% YoY respectively. On the realisations front, a strong double-digit growth in oil, cakes and cattle feed aided the overall growth for the year. The companyís sales for FY08 are 9% higher than our estimates.

  • Operating margins for 4QFY08 touched 19.5% (16.3% in 4QFY07), while for the full year they stood at 21%. Lower expenses (as percentage of sales) led to the expansion. Reduction in raw material costs to 77% of sales in FY08 (80.6% in FY07) and other expenses to 1.9% of sales (2.2% in FY07) were also instrumental in bolstering margins. The margins are in line with our FY08 estimates.

  • Expansion in operating margins aided by lower tax outgo aided the net profits in registering 107% YoY and 67% YoY growth for quarter and the full year respectively. Depreciation charges were on the higher side on account off expansion plans taken up by the company to augment it capacities. Tax rate for the full year stood at 34%, considerably lower than 41% recorded in FY07.

What to expect?
At the current price of Rs 216, the stock is trading at a price to earnings multiple of 6.7 times our estimated FY10 earnings. On the back of a robust industry scenario, capacity expansion and increased revenues from its value added activities, the company has reported good performance. The by-products did not only diversify its revenues, but were also instrumental in further enhancing the margins and the bottom line of the company. Although the company started off as a pure play non-basmati rice manufacturer, it is now uniquely positioned in two of the fastest growing sectors in the country namely food and power. With its capacity expansion initiatives in the coming years, LEAF is set for better times ahead. We maintain our positive view on the stock.

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Feb 20, 2018 09:27 AM


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