Piccadily Agro Industries Ltd - BSE Code 530305

Piccadily Agro Industries Ltd is an India Based company incorporated in the year 1994. The company's principal activity is to manufacture sugar and their by-products. They operate in two segments, namely sugar, which is engaged in the production of sugar, molasses and bagasse and other which is engaged in the manufacturing of liquor. 

Earlier, only sugar unit was operational, however starting late FY08 the company started with it's liquor unit. The commencement of operation of Liquor unit and it's rapid expansion will now catapult the company into a completely different league. The management is also aiming ambitiously at entering the Indian Made Foreign Liquor (IMFL) Section by introducing it's own brands in the market. 

 

Story Behind Piccadily Agro Industries Ltd

At the end of FY07, the company was only into sugarcane crushing and thus into the production of raw sugar, however they had started with the setting up of liquor facility. So, till FY07 they were largely a loss making  company.
For FY08 the company had started with the liquor production and sold some 21.77 lacs cases. In that year the company made a net profit of just Rs 1.2 crores but that was on account of 5 crore loss from Sugar Division. At the end of FY08 the company had some 27 crore capital work in progress, so they were still expanding their liquor facility.
For FY09 the company sold 28.6 lacs cases with a turnover of 48 crore. The company achieved Rs 5.4 crore profit from liquor and 3.29 crore profit from Sugar i.e. around 9 crore net profit. At the end of FY09 the company had 43 crore capital work in progress. This was again for the expansion of liquor unit.
For FY10 the company did a turnover of Rs 82 crore from liquor unit i.e. almost a 70% increase in revenue for liquor unit over FY09. The company achieved a Profit before Tax of around 17 crore from liquor unit and assuming 33% tax, a net profit of Rs 11.39 crore, so more than 100% increase in net profit from the liquor unit of the company.  
• At the end of FY10 the company has close to Rs 60 crore debt on it's books, however most of it has gone towards expansion. Between FY09 and FY10 the Gross block of the company increased by Rs 33 crore from Rs 83 crore to Rs 116 crore, while there is another Rs 13 crore capital work in progress.

Latest Jun'10 Results

• Talking about the latest Jun'10 results, the company has done a turnover of Rs 30 crore (Rs 16 crore in Jun'09) from liquor unit.
• However we have to keep in mind the fact that the company had close to Rs 13 crore capital work in progress, so there is still further expansion taking place in the liquor unit of the company.
• The company has recorded a net profit of Rs 7 crore from liquor unit during Jun'10 quarter while a cumulative net profit of Rs 6 crore on account of loss in sugar segment.
• The company can well record a net profit of Rs 30 crore for FY11, while the company is currently quoting at a market capitalization of Rs 105 crore.

Investment Rationale

• As mentioned player, the Management of the company are well known for their Financial and Political clout and thus they can overcome and get easy approvals for the expansion of their liquor unit.  
• At the end of Sep'10 the Management holds 68.89% equity stake in the company which is very good by any standards. 
• Over the last 2 years the Management has increased their stake by almost 10%. At the end of Dec'08 they had 59.18% stake in the company while at present they hold 68.89% stake. The Promoter's made open market purchase as recently as May'10. 
• The company is trading at a forward earnings PE multiple of 3.5 while the other listed companies like Som Distilleries, Tilakanagar Industries, Globus Spirits etc command much higher PE multiples of 15-30. 
• Although company is a small player in comparison to the above mentioned counterparts, however it maintains one of the highest margins in the liquor segment.
• The open market purchase by the Promoter's is the clear indicator of the earnings that the company may come out with in the subsequent quarters. 

 

2 Phase Buying Strategies Suggested [Always buy in SIP ways]

ü  1^st Phase  : Buy at the current price range Rs 42 – 45 [50% of investment]

ü  2^nd Phase : Add if the price falls down to Rs 33 - 36 [50% of investment]

>>Expect at least 10-12 times return in next 3 years from now!!!

PATIENCE IS THE KEY TO SUCCESS! HAPPY INVESTING!!!