EID Parry: Sweet quarter - Views on News from Equitymaster

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EID Parry: Sweet quarter

Jul 30, 2008

Performance summary
  • Reports a 198% YoY growth in the consolidated topline for 1QFY09. On the standalone basis, the topline is up 195% YoY.
  • While the margins on the consolidated basis improve by 0.3%, the standalone margins are positive at 35.6%.

  • On the consolidated basis, EID Parry reports a net loss, while on the standalone basis, it has profits as compared to loss in 1QFY08.

  • Sold 1 m shares held in Parryware Roca Private Limited (47%) to Roca Bathroom Investments SL, an affiliate of Roca Sanitario SA. and received the consideration of Rs. 7. 5 bn in July 2008.

Consolidated view
Rs(m) 1QFY08 1QFY09 (%) Change
Net sales 5,425 16,165 198.0%
Expenditure 4,852 14,408 197.0%
Operating profit (EBDITA) 574 1,757 206.4%
EBDITA margin (%) 10.6% 10.9%  
Other income 102 206 102.2%
Interest 223 212 -4.8%
Depreciation 244 245 0.6%
Profit before tax 209 1,506 621.0%
Extraordinary item - 1,586  
Tax 194 1137 485.1%
Profit after tax/(loss) 15 1,955 13380.7%
Minority interest (80) (720) 798.8%
Net profit (66) 1,235  
Net profit margin (%) -1.2% 7.6%  
No. of shares (m) 89.3 89.3  
Diluted earnings per share (Rs)*   26.3  
Price to earnings ratio (x)*   7.6  
* 12 month trailing earnings

What has driven performance in 1QFY09?
  • EID Parry reported a 198% YoY growth in the consolidated topline for 1QFY09. The farm inputs division grew by 230.5% YoY. On the standalone basis, the topline was up 195% YoY. While the sugar segment grew by 261% YoY, co-generation and bio products reported 44%YoY and 31% YoY jump respectively.

    Standalone picture
    Rs(m) 1QFY08 1QFY09 (%) Change
    Net sales 733 2,160 194.8%
    Expenditure 943 2,011 113.3%
    Operating profit (EBDITA) (210) 149  
    EBDITA margin (%) -28.7% 6.9%  
    Other income 69 69 -0.6%
    Interest 5 57 1155.6%
    Depreciation 107 121 13.0%
    Profit before tax (253) 40  
    Tax 1 12 778.6%
    Profit after tax/(loss) (254) 28  
    Net profit margin (%) -34.7% 1.3%  

  • During the quarter, the company crushed 1.2 MT of cane compared to 1.3 MT in the corresponding period of last year. The overall production of sugar was 0.1 MT, lower by 9% YoY because of a delay in crushing season. The average sugar realisation for the quarter stood at Rs 13,816 per MT, which were marginally higher as compared in 1QFY09. It also exported 9.6 m units (up 49% YoY) to the TNEB Grid in the quarter. Sugar division (including cogeneration) contributed 93% to the total sales in this quarter.

    (Rs m) 1QFY08 1QFY09 (%) Change
    Sugar 496 1,789 260.7%
    PBIT margin (%) -70.1% -4.3%  
    % of revenue 58.5% 78.0%  
    Co-generation 245 353 44.0%
    PBIT margin (%) 44.4% 44.7%  
    % of revenue 28.9% 15.4%  
    Bio products 75 98 31.3%
    PBIT margin (%) -3.6% 0.2%  
    % of revenue 8.8% 4.3%  
    Others 32 52 61.7%
    % of revenue 3.8% 2.3%  
    Total revenues 848 2,292 170.3%

  • While the margins on the consolidated basis (10.9%) improved by 0.3%, the standalone margins were at 35.6% as against negative margins last year. Last year, the company had witnessed lower sugar realisations and higher cane costs, which had affected the margins. This year with lower production expected in India, the sugar prices have moved up in the last quarter. On the PBIT front, the sugar division though in losses, has performed better as compared to that in 1QFY08.

  • On the consolidated front, excluding the extraordinary item (income received by Coromandel Fertilisers a subsidiary, as per the terms of business agreement entered into with Foskor Pty Limited, South Africa), EID Parry has reported a net loss. On the standalone basis, the company has reported profits as compared to loss in 1QFY08. Operating profits have helped the company turnaround in the quarter, inspite of higher tax and interest costs.

What to expect?
At the current price of Rs 200, the stock of EID Parry is trading at 7.6 times its 12 months trailing earnings. The company’s performance has improved in the current quarter. This is mainly due to relatively better sector scenario as compared to the corresponding quarter last year when the sugar sector was in doldrums. With higher realisations being witnessed and expected to further improve on account of lower production of sugar expected this year, things may be benign going forward. However, the risks of government regulations and raw material costs remain.

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