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EID Parry: Higher realisation saves the day - Views on News from Equitymaster

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EID Parry: Higher realisation saves the day

May 13, 2009

Performance summary
  • For the full year, the sales are higher by 18% YoY. Higher realizations witnessed in the sugar segment leads to the growth.
  • Lower costs of input as a percent of sales coupled with higher realizations led to the operating margin expansion of 12% YoY during the year.
  • The company turns profitable at the PBT levels. Besides improved operating performance, higher other income also help matters
  • Net profits for the full year get a big boost on account of an exceptional income to the tune of Rs 7.5 bn
  • Buyback of 3.1 m shares is done at a average price of Rs 141 per share.

Standalone picture
Rs(m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
Net sales 2,068 2,361 14.2% 6,866 8,123 18.3%
Expenditure 1,746 1,681 -3.7% 6,815 7,123 4.5%
Operating profit (EBDITA) 321 680 111.6% 52 999 1840.6%
EBDITA margin (%) 15.5% 28.8% 0.8% 12.3%
Other income 19 582 2917.6% 330 1157 250.7%
Interest 71 55 -23.1% 325 268 -17.5%
Depreciation 114 131 14.7% 440 502 13.9%
Profit before tax 155 1,076 594.5% (384) 1,387
Extraordinary item - 5 - 7,497
Tax (224) 144 (219) 1,964
Profit after tax/(loss) 379 938 147.4% (165) 6,920
Net profit margin (%) 18.3% 39.7%   -2.4% 85.2%  
No. of shares (m) 89.3 86.1   89.3 86.1  
Diluted earnings per share (Rs)* 10.9   80.4  
Price to earnings ratio (x)*     2.3  
* 12 month trailing earnings

What has driven performance in FY09?
  • EID Parry reports a 14% YoY growth in the standalone topline during 4QFY09. For the full year, the sales are higher by 18% YoY. Higher realizations witnessed in the sugar segment, which contributes around 79% of the topline during the year led to the growth. Sugar division reported a 23% YoY increase in sales. Bio-products sales increased by 40% YoY. However, cogen segment witnessed a decline due to lower volumes.

    Segment-wise performance
    (Rs m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
    Sugar 1,564 1,772 13.3% 5,306 6,511 22.7%
    PBIT margin (%) -0.2% 22.3%   -18.1% 1.4%  
    % of revenue 74.2% 73.5%   75.5% 78.5%  
    Co-generation 312 310 -0.5% 992 982 -1.0%
    PBIT margin (%) 42.8% 53.9% 36.5% 39.0%
    % of revenue 14.8% 12.9% 14.1% 11.8%
    Bio products 174 290 67.0% 468 645 37.9%
    PBIT margin (%) 23.7% 17.3%   15.6% 11.3%  
    % of revenue 8.2% 12.0%   6.7% 7.8%
    Others 59 38 -35.8% 260 155 16.8%
    % of revenue 2.8% 1.6% 3.7% 1.9%
    Total revenues 2,109 2,410 14.3% 7,026 8,293 18.0%

  • The company saw a marked improvement in the operating margins for both the period under consideration. Lower costs of input as a percent of sales coupled with higher realizations led to the expansion. On the PBIT front, while sugar division witnessed profits as compared to losses, cogen margins improved to 39% during FY09.

  • At the PBT levels, it reported profits as compared to losses last year. For the quarter, the net profits are higher by 146% YoY excluding the extraordinary item mainly on account of higher operating margins and other income.

  • On a consolidated basis, the company reported topline growth of 121% YoY driven by higher farm input sales during the year. The profits at the PBT levels surged by 165% by YoY mainly due to a five-fold jump in other income.

What to expect?
At the current price of Rs 188, the stock is trading at 2.3 times its 12 month trailing earnings. The sugar mills in South India had stopped crushing in less than seven months of the current sugar season (October 2008-September 2009). Lower production of sugarcane due to a fall in acreage, lower productivity and drop in sugar recovery led to the early closure and thereby lower volumes Further, as per the latest projections by the Indian Sugar Mills Association (Isma), India’s sugar output for the current sugar season is likely to touch 14.5 MT, a four-year low. This is a decline of over 45% from the 26.5 MT last season. This in turn has led to higher realizations and is expected to further inch upward. We believe, that though volume growth would be lower, significant upside to the price of sugar on account of shortage and cost push would be the growth driver.

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Aug 20, 2019 (Close)


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