Our team believes that stock is currently available at attractive valuations and can reward medium to long term investors in big way.
In FY13, company has sold nearly 8.4 million cases of country liquor (almost 4 times of what company sold in FY08) and their brands of the distillery i.e. Malta, Sofia, Ginn and Marshal continue to be well accepted by the people and have become popular brands in the state of Haryana. The distillery division has achieved a turnover of Rs. 2050 millions (205 crores) in FY 2013 and contributed 62% to total sales of 3317 millions (331 crores).
Now, if we look at first 9 months performance of 2014, company has achieved total sales of 2765 millions (276.5 crores), out of which sales of 1725 millions (172.5 crores) is achieved from distillery division where as sugar division contributed 1115 million (111.5 crores) of sales. Distillery division contribution in sales of first 9 months of FY 2014 is increased to 65% from last year contribution of 62%.
Below is the snap shot of Annual Results (in Crores):
Compounded sales growth during last 3 years is 25.04%, same during last 5 years is 23.25%. Compounded profit growth is also impressive, profit CAGR during last 3 years is 25.71%, same during last 5 years is 70.4%. ROE (Return on Equity) is above 25% during for last 5 years.
2. Recent Development
Purchased 89% share holding of M/s. Nirvana Biosys (P) Ltd.
Piccadily Agro Industries Ltd has informed BSE that Company has purchased 89% shareholding of M/s. Nirvana Biosys (P) Ltd, which has become a subsidiary of Piccadily Agro Industries Limited.
M/s. Nirvana Biosys (P) Ltd incorporated in the year 2008 has set up a plant of winery at Bawal, Distt. Rewari in the State of Haryana as a joint venture with E.C. Oxenham & CY. Ltd lle, Maurice-winemakers for over 75 years with a French Lineage. The Company has a distinction of setting up of a first such winery in the Northern India.
M/s. Nirvana Biosys (P) Ltd is committed to producing affordable table wines for the Indian markets that are comparable to French & Italian Levels and has also introduced other unique variants that have never before produced in this region. The range includes Red, white, Sparkling, Port, Lychee, Mango , Rose & Herbal wines.
The products of Company are selling in more than 12 states of India along with various CSD canteens. This will enable the Company to expand the product range of the Company & will substantially affect the profitability of the Company.
ii) Looking at valuations, we find Piccadily Agro extremely cheap compared to peer companies and currently available below its intrinsic value. Considering the fact that company is generating profits from its liquor business and incurred loss from its sugar business which is cyclic in nature, stock looks undervalued and offers good upside potential with limited downside risk in medium to long term.
viii) We expect company will continue to deliver similar growth in top line and bottom line like that of last 3 years from its distillery business. Sugar business may not perform well in near term due to depressed sugar prices but can add significant bottom line from second half of FY 14-15 which will help company to improve its operating margins.
x) History of Promoters could be one of the reason why this company stock is available at cheap valuations. We would like to inform our members that the former director of the company is the infamous Manu Sharma who is serving life imprisonment for the 1999 murder of model Jessica Lal. But under his leadership the company was a loss making unit. Under the new management the company has turned around, paid regular dividends and has moved into high growth liquor business.
Saral Gyan Recommendation: We suggested our members to accumulate Piccadily Agro Ltd in the range of 23 to 28 and hold it for time period of 12-15 months for price target of 52. Stock is giving returns of more than 50% in short span of 3 months, we advice our members to continue holding this stock. Piccadily Agro Ltd is still a decent buy at current market price of Rs. 38.85 for long term investors who can stay invested in the stock for 12 to 24 months.
Team - Saral Gyan
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