Its results season again and an excellent time to tweak portfolios. For us its exciting times as we get several new ideas to work upon. One such new idea is – IFB Agro listed on both BSE (507438) & NSE and trading at about Rs 105. The co has posted excellent Q1 numbers:
Particulars | June 11 | June 10 | % Variation | FY 2011 |
Sales | 136.07 | 96.78 | 40.6% | 422.82 |
PBIDT | 15.82 | 3.67 | 331.1% | 36.27 |
Tax | 4.57 | 0.17 | 2588.2% | 8.4 |
PAT | 9.05 | 0.93 | 873.1% | 17.82 |
EPS | 11.31 | 1.16 | 22.26 |
IFB Agro is part of the IFB group and it has two business divisions – IMFL & Agro Marine.
IFB Agro is one of the largest producer of alcohol in Eastern India, having 6 large captive bottling plants situated in Bengal, Orissa and North East. The company has a strong position and had made sale of 5.5 lac cases of IMFL products in 2011. The value of sales of Liquor division in 2011 was 327 Cr vs 241 Cr last year.
In the Agro Marine division, the company is into exporting of Prawns and selling of Feeds business. The agro marine industry was going through a tough time till 2009, but since mid 2010, the situation has improved and the future is bright. IFB has a 48% market share in the shrimp feed business in West Bengal. In FY 2011, the company achieved a turnover of about 122 Cr vs 52.59 Cr. “IFB Royal” is the brand name of the frozen marine product of this company
The liquor business is witnessing a strong demand and hence the company has set up a new bottling plant at Panagarh, West Bengal. Company is awaiting for a couple of approvals to start the operations.
Attractive Valuations at CMP of 105:
- Co has been growing at a CAGR of 26% for last 5 years. In FY 2011, the company posted a turnover of 451 Cr vs 293 Cr thereby growing @ 30%.
- FY 2011 NP was 17.83 Cr vs 4.43 Cr thereby posting an EPS of 22.
- Co reduced the debt from 31.4 Cr in FY 2010 to just 4.5 Cr in FY 2011. So it’s almost a debt free co now.
- Q1 results of FY 2012 have been strong and co has posted a 40% topline growth with 10 times increase in profits.
- Stock is available at less than 5 times FY 2011 EPS of 22.
- Stock is available at less than Book Value of 110.
- For FY 2012, the co should be able to cross the turnover of 500 Cr and may an EPS of 30-35. Stock is available at less 3 times expected earnings.
Concerns:
- Co had mentioned that WB Govt. has discontinued the molasses transportation cost reimbursement policy from December 2010 and this has made operation of distillery unviable. Though the quarterly results of both March & June quarter have been very strong but this might still be a risk. We are trying to understand the impact/outcome of the same.
- IFB Group hasn’t been giving any dividend till now.
- The business witnesses volatility in earnings.
Conclusion:
When the valuations are very attractive and business is showing early signs of strong growth or improvement in earnings, one should participate in the stock.
IFB Agro despite being a debt free company is available at a M Cap of just 85 Cr while in FY 2011, it had sales of 450 Cr and NP of 17.83 Cr. We feel IFG Agro is an interesting pick at these levels.
Financials & Worksheets:
YO AYUSH ,
YOU ARE JUSTING ROCKING MAN.. IFB AGRO UP 20% , YOUR SMRUTHI ALSO ROCKS. I HAVE MISSED BOTH OF THEM BUT GOT STUCK IN IST @185 , KINDLY ADVISE ME ONE ROCKING STOCK LIKE IFB AGRO EXCEPT IST LTD.
WAITING FOR YOUR REPLY.. THANKS , TIDE WATER ALSO DOING WELL , CAN BE A CANDIDATE FOR OPEN OFFER TRIGGER FIGHTS AFTER A COUPLE OF YEARS.. WAITING FOR YOUR ONE ROCKING STOCK RECOMMENDATION WHICH HAS NOT MOVED UP YET BUT CAN BE A MULTIBAGGER
Hi,
Thanks for appreciation 🙂 I feel there is good value in IST and may be when sentiments will improve, it will also do well.
Will keep a tab on Tide Water.
Other existing ideas discussed at our blog still have lot of potential…have a look and do participate in them.
Regards,
IFB Agro… Raw material for alcohol is a) Molasses b) Rice grain. Key issue for future (atleast 2 – 3 quarters) profitability will be cheap availability of molasses as the company has suffered from the lack of it in earlier years. If anyone can talk to management and have an idea about the availability of molasses for next few quarters. That will be great.
Hi Sanjeev,
As per the latest Annual report, the co is making grain based alcohol only. The WB Govt has removed some reimbursement model for molasses transportation so the co isn’t making alcohol from molasses.
Yes, if mgmt becomes transparent and starts talking to analysts, the stock can get better valuations.
Regards,
it doesnt’t seem to stop northward move……………bought at 136(when it was near 52week high) last week and exited at the same price because there was so much of turmoil in all world markets…………..now it is 170 and all other stocks which i didnt exit are down around 20-40%
Yeah, the stock has done great.
I read your post. That was amazing. Your thought processing is wonderful.
The way you tell the thing is awesome. They are inspiring and helpful.
Thank you.
Intraday Tips for Tomorrow
century text now quoting at 303 levels.start accumulating . mkt whispers are tha management(birlas and their associate co’s) are buying shares from the mkt. fallen considerably since six months. moreover, construction of their business centre is in full swing. nearing completion. they have the best property locationwise remaining in this area, and hence demand will be good. such large tract of land in nowadays scarce in area like lower parel , etc. hence, once the land is developed there is huge potential etc.
Hi,
Haven’t tracked this closely…will keep a tab. Fall might have been due to the fall in the yarn sector.
Regards,
Not understand the reason of not declaring dividend by IFB when last 5 years company doing good.
Hi,
It seems to be an issue with the IFB group…they don’t give dividend in their other co – IFB Ind also.
Dear AyUsHjI, Why ifb agro is fallin after ggvin good result. What is the reason ? Thank U
No idea. Most of the mid/small caps are falling due to fear and less participation in the markets. May be the reason is same here.
You have given very interesting stock ideas. How long do you intend to hold these companies in your portfolios? what is the right time to sell?
is it still a good idea to buy IFB agro at 164?
Hi Daya,
Usually we keep holding the ideas till the undervaluation goes away or the story changes.
IFB does look good but try accumulating on dips rather than rises.
Thanks, Ayush. I will buy on dips. I have started studying your ideas and analysis. I like your approach and I have benefited from your ideas. Thanks a lot!! I am taking my own picks for the long term. I like Nesco and Indag Rubber. Do you consider the moats a company enjoys like brand, monopoly situation etc.? Would love to have more of your analysis on these points…
Yes, understanding of moats etc is very imp. For eg: If one has to choose between Indag & Guj Reclaim, i would rate Guj Reclaim better because of much superior margins, business dominance and growth prospects.
Hi, IFB agrp is trading at 128. Any update on current valuation?
The stock seems to have value but the price is subdued as the profits have fallen due to VRS & impairment expenses being charged by the company.
is it Time to revisit IFB agro
The co has posted good results despite lots of challenges. It does has potential at these prices.