Company Analysis

McLeod Russel India Ltd.

Buy
Company Basics BSE ID NSE ID GROUP EQUITY MKT.CAP 532654 MCLEOD A Rs. 54.73 Cr Rs 3910.Cr

CMP: Rs.361

Target: Rs.489

Exp ROI: 35%

Financial Basics FV EPS P/E P/BV BETA RONW Rs 5.00 Rs 20.01 17.85 3.30 0.7106 21.40

Share Holding Pattern Holder's Name Foreign Institutions Promoters Non Prom. Public & Others % Holding 34.31 5.32 45.41 5.02 9.65

Back-Ground:

The flagship tea company of the B M Khaitan group, McLeod Russel India Limited (MRIL) was originally incorporated as Eveready Company India Private Limited on 5th May 1998. MRIL is the world's largest tea plantation company, which produce over 70 million kilos of high quality tea from our 53 tea estates in Assam and West Bengal. As the largest Indian tea exporter the company maintains strong connections with buyers in the United Kingdom and Europe. The Company's tea is marketed under the registered Elephant trade mark. Apart from the tea, McLeod Russel has over the past five years been closely working with local towns and villages throughout North East India with the cultivation of Jatropha (Jatropha curcas) under Agricultural project, which is used to make D1 Oil - Bio Diesel. Declining Production against constant rising consumptions: Poor weather conditions led to a 1.7 per cent drop in tea production in India during the January-October period, according to latest figures released by the Tea Board of India. At 12.31 million kg, North India (West Bengal and Assam) saw the sharpest decline in production. South India recorded a 3.70 million kg drop in output. Overall production during the period stood at 902.27 million kg, against 918.28 million kg in the corresponding period last year. In 2011, Indias tea production stood at 988 million kg. The annual rise in tea consumption in India is about three per cent and the cumulative deficit at the beginning of the next season is estimated at about 150 million kg. The Tea Board figures factor in some of the bought leaf factories output; till recently, only the organized sector was accounted for. The industry feels if the bought leaf output is considered, growth in consumption could be higher. Management Guidance
Source: Business Standard The management expects consolidated crop size of 102 million Kg in FY12. Margins to be also

higher owing to improvement in Vietnam and Uganda Operations. It is also looking for acquisition of tea gardens in South Africa The company plans to decrease debt on its books aggressively this year. On a standalone basis, the company plans to become debt free company but for looking for acquisitions in South Africa. Capex for FY12 stood at Rs 60 crore on consolidated basis and Rs 35-40 crore on Standalone basis Outlook & Conclusion: Currently, McLeod Russell Ltd. is trading at Rs.360. We Recommend Buy with a Target Price of Rs 489 based on forward P/E of 13.14 with an Expected Earnings per Share of Rs.27.40 in FY2014. Equity Research Manager: Nipun D Bhatt
4th Jan, 2013

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