country: india sector: edible oil ks oils · 2017-07-25 · ks oils 15 may 2008 jm financial ask...

JM Financial ASK Securities Private Limited Please see important disclosure at the end of the report.

Oil to riches Increasing share of organised players in the edible oil segment…

Implementation of Value Added Tax (VAT) from April 2006 has enabled organised players to increase market share in the US$17 bn Indian edible oil market. The mustard oil market (20% of the total), presents an opportunity as only 20-25% is organised so far. We expect the organised mustard oil market to increase its share to 70-75% over the next three years and KS Oil (KSO)would be the biggest beneficiary as it enjoys 25% market share.

…led to faster revenue growth and improving margins for established players... KSO’s crude mustard oil volumes have grown at a CAGR of 40% since FY05 due to reduction in competitive disadvantage and increasing adoption of brands and retail packs. This has led to over 500 bps improvement in EBITDA margins and 230% CAGR in net profits.

…enabling investments and forays into other oils; driving growth KSO has embarked upon a capex programme of over Rs6.5 bn to expand crushing/refining capacities by 3.5-4x and solvent capacity by 6x in the next two years. This will fortify its share in the mustard oil segment and help build its presence in the soya/palm oil market. Hence, we expect 40% CAGR in mustard oil volumes to drive 48% CAGR in net profits over the next two years. Further, its recent foray into palm plantation at a capital outlay of Rs2.3 bn over three years would provide upsides beyond FY10.

Initiate with a Buy; 50% upside in 12 months: KSO got re-rated since June 2007 and is currently trading at 18x FY09E EPS and 10x FY10E EPS after building in 48% CAGR in profits over FY08-10E. We believe the company can continue to deliver solid growth even beyond this period with its entry into newer segments and foray into palm plantations. We initiate with a Buy recommendation and March 2009 target price of Rs115, based on 15x FY10E EPS. Risk to our call is fluctuations in commodity prices and hedging positions, which make it difficult to predict earnings accurately.

Exhibit 1: Financial summary (Rs mn)

Initiating Coverage

KS Oils Bloomberg: KSO IB

Buy Price: Rs75 Target Price (Mar 09): Rs115

Y/E March FY05 FY06 FY07 FY08E FY09E FY10E Net sales 4,525 6,082 10,875 20,411 30,283 45,737 Sales growth (%) (3.3) 34.4 78.8 87.7 48.4 51.0 EBITDA 138 272 927 2,252 2,934 5,127 EBITDA (%) 3.1 4.5 8.5 11.0 9.7 11.2 Adjusted net profit 33 152 573 1,227 1,442 2,691 NPM (%) 0.7 2.5 5.3 6.0 4.8 5.9 EPS (Rs) 0.3 0.9 2.2 3.4 4.0 7.6 EPS growth (%) 49.2 149.1 157.7 56.8 17.5 86.6 ROCE (%) 9.9 18.2 32.6 24.0 15.4 18.9 ROE (%) 12.8 32.4 30.1 19.0 17.2 24.5 PE (x) 216.2 86.8 33.7 21.5 18.3 9.8 Price/Book value (x) 27.6 28.2 10.1 4.1 3.2 2.4 EV/EBITDA (x) 4.9 3.0 0.9 1.1 2.0 1.7

15 May 2008 Sector: Edible Oil Jesal Shah [email protected] Tel: (91 22) 6646 0000 Achal Lohade [email protected] Tel: (91 22) 6646 0000

Key Data

Market cap (bn) Rs24.8/US$0.6 Shares in issue (mn) 332.4 Diluted share (mn) 356.0 3-mon avg daily val (mn) Rs154.9/US$3.6 52-week range Rs142/36 BSE sensex (14/05/08) 16,978 Nifty (14/05/08) 5,012 Rs/US$ 42.4 Shareholding Pattern (%) 4Q FY07 4Q FY08 Promoters 29.4 32.9 FIIs 12.5 29.1 MFs/FIs/Banks 0.0 0.2 Public 58.1 37.8 Others 0.0 0.0

Price Performance (%) 1M 3M 12M Absolute 1.4 -10.0 106.4 Relative* -6.0 -5.5 84.9 * To the BSE Sensex Daily Performance

20.0

50.0

80.0

110.0

140.0

Apr-07 Jul-07 Oct-07 Jan-08 Apr-085,000.0

10,000.0

15,000.0

20,000.0

25,000.0KS OIL Sensex

(As of 14 May 2008)

Country: India

Source: Company data, JM Financial ASK Securities. Note: Valuations as of 14 May 2008

KS Oils

JM Financial ASK Securities Private Limited 15 May 2008

Increasing share of organised players The Indian government introduced VAT for edible oil in April 2006. This significantly improved the competitive situation for organised players, players like KSO and Ruchi Soya (RS) have grown rapidly in this market. We believe organised players will continue to increase their market share and KSO will be able to maintain its market share.

Indian edible oil market is big… Exhibit 2 shows that the Indian edible oil market has grown at 13% CAGR over FY03-07 to reach over US$17 bn. Importantly, it has grown at 6% volume CAGR for last two decades. Yet, the fragmented, unorganised nature of the industry has made it unattractive for investments till recently. Exhibit 2: Edible oil volumes have grown @ 6% CAGR since FY03...the value growth has accelerated to 13% CAGR over last four years Source: Industry, USDA, JM Financial ASK Securities

..but, has only recently become investment-worthy Till recently, the market was unorganised due to low entry barriers, lack of branding and fragmented distribution structure. Further, unorganised players had been doing well due to multiple reasons including blending of different grades of oil, tax evasion, power theft, lower quality of packaging, etc. The industry had 15,000 oil mills, 600 solvent extraction units, over 650 refining units and 250 vanaspati units with 50% of players with an output of less than 60TPD and total capacity utilisation of less than 30%. Hence, the organised sector margins were impacted - impeding their growth. However, since April 2006, this situation has changed as the government introduced VAT. Post the introduction of VAT, and stricter implementation of VAT at mandis, unorganised players lost out on the 4% sales tax differential, which they enjoyed earlier. In the pre-VAT era, organised players had a 4% disadvantage as unorganised players avoided paying sales tax on finished products. However, in the new system, they are forced to pay sales tax on purchase of raw material and hence lose out on sales tax credit, if the finished product is sold in cash. Thus, the 4% differential on raw material cost gets nullified. For an industry operating at 4% EBITDA margins, this was a big saving. Exhibit 3 shows the difference in two cases.

1.1 1.64.31.3 1.7

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0.61.1

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2.13.3

3.8

-2.04.06.08.0

10.012.014.0

1987-88 1997-98 2007-08

Mn tn Palm Oil Rapeseed Oil Soybean Oil Others

4.6% CAGR

152 128209

40 9610872

114104

116

181

215

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Rs BillionsPalm Oil Rapeseed Oil Soybean Oil Others

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FY03

CAGR Volume - 6.5% Value - 13.5%

KS Oils


Exhibit 3: VAT has reduced competitive disadvantage Rs per ton of mustard seed Pre-VAT Post-VAT

Organised Unorganised All players Seed price per ton 16785 16785 16785 Sales tax @4% 0 0 671 Total cost 16785 16785 17457 Mustard oil @425kg @Rs44.4/kg 18,884 18,884 18,884 Sales tax @4% 726 0 726 Net sales 18157 18884 18157 Gross profit 1372 2098 1372 Margins 7% 11% 7%

Source: Industry JM Financial ASK Securities As a result, the organised market share in mustard seed has increased from 10% to 20-25% in two years. The ramp-up in soya has been faster as against mustard with the organised sector now controlling over 70% share. This is due to the following reasons: a) Easier sourcing of raw materials: Entry of large multinational

companies like Cargill, Wilmar, and Bunge due to imported palm/soya crude versus mustard seeds, which have to be procured locally. Hence, it was possible for these companies to garner market share in soya/palm on the back of economies of scale (see Exhibit 4).

Exhibit 4: Imports make up larger part of domestic consumption

Mn tonnes 2002 2003 2004 2005 2006 2007 2002-07 CAGR

Palm oil (imports) 2.9 3.8 3.4 3.0 2.6 3.1 1.1% Domestic Palm oil cons 3.5 4.0 3.4 3.2 3.0 3.6 0.4%

as% of palm oil cons 83% 95% 99% 94% 85% 86% Soybean oil (imports) 1.5 1.2 0.9 2.0 1.7 1.3 -2.1% Domestic soybean oil cons 2.3 1.9 1.9 2.6 2.9 2.6 2.5%

as% of soybean oil cons 64% 63% 48% 77% 59% 51% Others (imports) 0.0 0.1 0.1 0.0 0.1 0.3 69.5% Total 4.43 5.11 4.40 5.04 4.42 4.7 1.2%

Source: USDA, Solvent Extractors Association of India, JM Financial ASK Securities Estimates

b) Faster expansion of capacities by soya players like RS led to faster

increase in share of the organised sector (see Exhibit 5). Exhibit 5: Ruchi’s aggressive capacity expansion drives share 000 MTA FY03 FY04 FY05 FY06 FY07 FY03-07 CAGR* Oils 687 987 1,101 2,052 2,052 22.6% DOC 432 555 1,047 1,894 2,128 41.4% Vanaspati 173 233 233 470 470 11.7%

Source: Company Annual Reports, JM Financial ASK Securities *CAGR excludes the capacities acquired in FY 2006 on account of merger of group companies c) Margin difference still exists in mustard oil, as unorganised players

continue to save 4-5% on account of cheaper packaging and blending of different oils.

KS Oils


Overall, as shown in Exhibit 6, organised players have sales of 2.3 mn tonnes of edible oil out of the total consumption of 12.5 mn tonnes for FY06-07, controlling 18% market. Exhibit 6: Organised players in edible oil industry

000 Tonnes FY02 FY03 FY04 FY05 FY06 FY07 FY02-07 CAGR

Ruchi Soya 969 985 877 954 1,730 1,570 10% Liberty Oil Mills Ltd 271 354 308 244 244 217 -4% KS Oils 89 65 72 75 118 203 18% Vimal Oil 33 48 45 54 87 97 24% Others 90 125 123 92 133 177 14% Total organised sales 1,452 1,577 1,424 1,419 2,311 2,264 9%

Overall Consumption 9,444 10,105 10,820 11,366 12,280 12,510 6% % of total consumption 15.6% 13.2% 12.5% 18.8% 18.1%

Source: Capitaline

In addition, according to AC Nielsen data, Wilmar and Cargill have 23% share and NDDB’s (National Dairy Development Board) Dhara has c.12% share – taking the total share of the branded segment to 53%. We believe organised players will continue to increase their share especially in the mustard oil segment as smaller players will find it difficult to operate and manage sub-scale business in a dynamic industry while big companies will rapidly expand capacities. We expect organised share of the mustard oil segment to increase to 70% over the next two years. Further, we expect KSO to maintain its share in the organised segment of mustard oil, even as newer players like RS capture share from smaller players.

KS Oils


Faster revenue growth and improving margin outlook has enabled investments for future growth With improving industry fundamentals, KSO has been able to grow its mustard oil volumes at 40% CAGR over FY05-08E and improve EBITDA margins from 4.5% to 11% on the back of larger volumes and higher branded sales. This led to a 230% CAGR in net profit, which has enabled the company to expand capacities by 4-6x and venture into other edible oils. We expect 40% CAGR in mustard oil volumes over the next two years. Further, higher proportion of the branded/retail segment will help maintain margins at the current high levels of 10-11% for the next two years. This will drive 48% CAGR in net profits over FY08-10E. Improving financials… As seen in Exhibit 7, KSO has been able to improve its financial position over the last three years due to higher branded sales and improving prices. Exhibit 7: Significant increase in profits… Rs mn FY05 FY06 FY07 FY08 FY05-08 CAGR Sales

Oil 3,744 5,019 9,447 15,716 61% Others 781 1,063 1,281 4,694 82%

Total 4,525 6,082 10,728 20,411 65% % change 34% 76% 90% EBITDA 138 272 927 2,252 154% margins 3.1% 4.5% 8.6% 11.0% % change 97% 241% 143% PAT 33 152 573 1,227 232% margins 0.7% 2.5% 5.3% 6.0% % change 353% 278% 114%

Source: Company Annual Reports, JM Financial ASK Securities

Margins have also improved due to higher proportion of brands and retail packs to total sales. Retail packs and brands have higher margins than bulk packs and loose. Exhibit 8:…driven by higher share of brands/retail packs

Rs mn FY05 FY06 FY07 FY08 FY05-08 CAGR Branded 2,162 2,926 6,560 12,234 78.2% % of total sales 47.8% 48.1% 61.1% 59.9%

Retail Packs 672 586 2,308 6,306 110.9% % of total sales 14.9% 9.6% 21.5% 30.9% Bulk Packs (above 15kg) 1,490 2,329 4,253 5,633 55.8% % of total sales 32.9% 38.3% 39.6% 27.6%

Non branded 2,363 3,156 4,169 8,176 51.3% % of total sales 52.2% 51.9% 38.9% 40.1% Total Sales 4,525 6,082 10,729 20,411 EBITDA Margins 3.1% 4.5% 8.6% 11.0%

Source: Company, JM Financial ASK Securities

KS Oils


Margins for other organised players have also improved , but KSO’s presence in mustard/brands is fetching it higher margins than peers (see Exhibit 9). Exhibit 9: KSO’s margins are higher than peers’

Sales (Rs mn) EBITDA margins Net Profit margins

FY05 FY06 FY07 FY05 FY06 FY07 FY05 FY06 FY07 Ruchi Soya 46,747 75,474 89,710 2.2% 3.0% 3.1% 1.1% 1.2% 1.2% Gokul Refoils 10,833 12,500 15,625 3.5% 2.4% 4.2% 1.7% 0.9% 1.7% KS Oils 4,525 6,082 10,875 4.5% 8.5% 11.0% 2.5% 5.3% 6.0% Agro tech Foods 10,432 9,379 10,382 1.5% 1.9% 2.4% 0.9% 1.0% 1.6% Liberty Oil Mills 10,420 8,763 10,002 2.4% 1.9% 2.1% 0.6% 0.1% 0.3% Vimal Oil 2,451 3,629 4,904 2.6% 2.2% 2.5% 0.4% 0.6% 0.7% Vijay Solvex 2,703 3,254 4,635 3.1% 2.5% 3.7% 1.2% 0.8% 1.6% Sanwariya Agro Oils 1,748 2,201 4,452 3.3% 3.5% 5.2% 1.6% 1.7% 2.7%

Source: Capitaline, JM Financial ASK Securities

…enabled greater investments… Given the improving financial outlook, the stock price moved up 4x over last one year to its current market capitalisation of Rs26.5 bn (US$650 mn). The company raised money in several tranches (see Exhibit 10). Exhibit 10: Better profits enabled fund-raising … Fund raising No. of Share cap Premium Total fund raising shares Rs mn Rs mn Rs mn Equity capital 4.9 48.9 Warrants @Rs25/share 3.5 35.0 52.5 Equity capital as on 31/3/06 8.4 83.9 Preferential allotment @Rs225/share 0.9 9.0 193.5 Bonus 1:1 9.4 0.0 Equity capital as on 31/3/07 18.8 188.0 Equity to CVC @ Rs180/share 3.3 32.9 559.3 592.0 Split 1:10 220.9 220.9 Shares to Baring @Rs41.9 21.5 21.5 879.4 901.0 Shares to CVC @Rs41.9 0.1 0.1 3.8 4.0 GDR @ Rs41.9 30.7 30.7 1257.3 1288.0 GDR @ Rs41.9 19.1 19.1 780.8 800.0 Warrants @Rs18/share-promoter 23.0 23.0 391.0 414.0 Warrants @Rs18/share-CVC 17.1 17.1 290.4 307.0 Warrants issued to promoters Rs41.9 23.9 23.9 476.1 500.0 Diluted equity capital as on 31/3/08 356.3 356.3 Additional money from warrants 500.0 500.0 Total funds raised (Rs mn) 5306.0


KS Oils


The fund-raising would have diluted promoters’ stake from 29.35% to 22.7% (even though funds were raised at c.Rs42/share) but for the warrants issued to promoters, which restore their holding to 33%. The dilution would have been 17%, instead of 22.7%, if the stock had not moved up from Rs18. With this fund-raising, the company has been able to increase its capacities. Exhibit 11:…leading to aggressive capacity expansion

'000 MTA FY07 FY10 P Multiplier

Oil Mill 1225 5,225 4 X

Solvent Extractions 600 3,600 6 X

Refinery 400 1,400 4 X

Wind Mill (MW) 2.5 48 19 X Source: Company, JM Financial ASK Securities As seen in Exhibit 11, KSO’s crushing and refining capacities are likely to increase 4x whereas its extraction capacities are set to jump 6x over FY08-10E. …will drive revenue and profit growth… This expansion of capacities and favourable industry dynamics should drive revenues (see Exhibit 12). Exhibit 12: …paving the way for solid revenue growth

Rs mn FY08 % FY09E % FY10E % FY08-10 CAGR Mustard 9,681 47% 14,502 48% 21,303 47% 48%

Branded 7,746 38% 12,002 40% 18,572 41% 55% Loose 1,935 9% 2,500 8% 2,731 6% 19%

Refined Oil 5,530 27% 10,637 35% 16,645 36% 73% Mustard 855 4% 1,317 4% 2,651 6% 76% Others 4,674 23% 9,320 31% 13,994 31% 73%

Power 170 1% 310 1% 450 1% 63% Others* 5,041 25% 4,834 16% 7,339 16% 21% Total Sales 20,421 100% 30,283 100% 45,737 100% 50%

Source: Company, JM Financial ASK Securities Estimates *Others include mustard cake, soya De-oiled Cake, Vanaspati and trading sales

We expect the company to move into soya oil with capacity augmentation in extraction.

KS Oils


Exhibit 13: Manufacturing - Integrated process

Source: Company Further, we expect the company to maintain its margins at the high levels of FY08 due to greater share of retail/branded packs and a firm outlook on prices of raw material/finished products. See Exhibit 14 for our retail segment sales expectation in FY09E-10E. Exhibit 14: Higher share of brands will help sustain margins

Rs mn FY08 FY09 % chg FY10E % chg FY08-10 CAGR Mustard 9,681 14,502 50% 21,303 47% 48%

Branded 7,746 12,002 55% 18,572 55% 55% Loose 1,935 2,500 29% 2,731 9% 19%

Refined Oil 5,530 10,637 92% 16,645 56% 73% Branded 3,318 6,382 92% 9,987 56% 73% Loose 2,212 4,255 92% 6,658 56% 73%

Total Sales 20,421 30,283 48% 45,737 51% 50% Source: Company, JM Financial ASK Securities Estimates

We believe the entry of other organised players in this space and KSO’s expansion of capacities will drive faster adoption of the branded segment, particularly retail packs. Additionally, we expect the pricing outlook to remain firm, based on the demand/supply situation for edible oils (see Exhibit 15).

KS Oils


Exhibit 15: Stock to use ratio for oils is lowest in last six years

Mn Tonnes 2003 2004 2005 2006 2007 2008E 2003-08 CAGR

Oilseed- Production Soya 196.8 186.6 215.8 220.5 237.3 220.0 2.2% Rapeseed 32.9 39.4 46.2 48.7 46.8 47.6 7.7% Others 100.6 109.2 119.9 122.5 124.0 123.2 4.1% World total cons 330.3 335.3 381.8 391.8 408.04 390.8 3.4% % change 1.5% 13.9% 2.6% 4.1% -4.2% Stock to use ratio 14.9% 13.3% 15.5% 16.8% 18.4% 14.1% Oils- Consumption Palm 28 29 33 35 37 41 8.0% Soya 30 30 32 34 36 38 4.7% Rapeseed 12 14 16 17 18 18 8.4% Others 25 27 28 30 31 31 3.8% World total cons 95 100 108 115 121 128 6.0% % change 5.1% 7.6% 6.7% 5.2% 5.2% Stock to use ratio 8.8% 8.7% 9.4% 8.8% 7.5% 7.0%

Source: USDA

Exhibit 16: World consumption of oils is growing apace

Mn Tonnes 2003 2007 2008 E 2003-08 CAGR Soya Oil Production Brazil 2.9 3.4 3.6 4.3% China 6.4 8.6 9.8 8.9% India 1.9 2.6 2.6 6.7% USA 7.7 8.5 8.5 1.8% World 30.2 35.6 38.0 4.7%

Top 4 (% of total) 63% 65% 64% Consumption Brazil 5.2 5.9 6.1 3.1% China 4.7 6.3 6.8 7.5% USA 8.4 9.3 9.6 2.9% World 30.6 36.3 38.3 4.6%

Top 3 (% of total) 60% 59% 59% Palm oil Production Indonesia 10.3 16.6 18.3 12.2% Malaysia 13.2 15.3 17.4 5.7% World 27.6 37.3 41.1 8.3%

Top 3 (% of total) 85% 85% 87% Consumption China 3.5 5.1 5.8 10.5% EU-27 2.9 3.4 3.7 4.9% India 4.2 3.8 4.3 0.2% Indonesia 3.6 4.6 4.8 5.9% World 27.6 36.9 40.5 8.0%

Top 4 (% of total) 52% 46% 46% Rapeseed Oil Production China 3.5 4.6 3.8 1.2% India 1.3 2.1 2.0 7.9% World 12.2 17.6 18.0 8.0%

Top 2 (% of total) 40% 38% 32%

KS Oils


Mn Tonnes 2003 2007 2008E 2003-08 CAGR Consumption China 3.7 4.9 4.3 3.0% India 1.4 2.1 2.0 6.5% World 12.3 18.0 18.4 8.4%

Top 2 (% of total) 41% 39% 34% Source: USDA As seen in Exhibit 16, world consumption of edible oils has been growing at 6% CAGR over the last five years, whereas the production of seeds has been growing at 4%, leading to a drop in stock to usage ratio. Further, demand from alternative crops e.g. corn, sugarcane, etc, for ethanol also leads to changes in acreages depending on pay-offs. Exhibit 17: Corn acreages have increased, putting pressure on all crops

mn hectares 2002-2003 2007-2008 CAGR-5 yr Soya Wheat Corn Soya Wheat Corn Soya Wheat Corn Argentina 12.6 5.9 2.5 16.8 5.6 3.1 5.9% -1.0% 4.8% Brazil 18.4 2.0 13.0 21.3 1.8 14.5 2.9% -2.3% 2.3% United States 29.3 18.5 28.1 25.4 20.6 35.0 -2.8% 2.2% 4.5% Others 0.0 0.2 0.1 0.0 0.2 0.1 4.3% 0.1% 2.3% World Total 82.3 215.2 137.9 90.6 217.5 158.6 1.9% 0.2% 2.8%

Source: Oil world

Exhibit 18: Corn prices drive… …Prices of soybeans… … and Wheat

Source: Bloomberg, JM Financial ASK Securities Exhibit 19: Profitability of crops

Cost Yield (tonne) cost per tonne Realisation Gross margin Gross margin Rs/ha Tonne/ha Rs/tonne Rs/tonne Rs/tonne Rs/ha Paddy 17,000 1.93 8,808 13,630 4,822 9,306 Wheat 14,000 2.58 5,426 15,000 9,574 24,700 Soya 10,000 1.05 9,524 22,000 12,476 13,100 Mustard 10,000 0.88 11,364 25,600 14,236 12,528 Sugarcane 30,000 70.00 429 900 471 33,000 Palm 40,000 2.50 16,000 43,500 27,500 68,750

Source: Industry, JM Financial ASK Securities

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KS Oils


Exhibit 20: Prices for all crops have increased since 4Q FY06

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01002003004005006007008009001000

USD/tonneSoybean oil (Crude), NetherlandsPalm oil, EuropeRapeseed Oil,ChinaRice (5% broken), BangkokWheat (No.2 soft red winter), Gulf portMaize (No.2, Yellow), Gulf port

Source: JM Financial ASK Securities Prices of all edible oils (see Exhibit 20) have increased in the last two years, on the back of higher consumption (from China, and India), increased usage of seeds for biofuel (see Appendix on Page 20) and constrained capacities. Exhibit 21 shows that the acreages under cultivation and crop yields have not increased much globally over the last few years. Exhibit 21: Acreages and yields are not keeping pace…

Acerage ( Mn ha) Yield (tonnes/ha)

2005-06 2006-07 2007-08E 2005-06 2006-07 2007-08E Soyabeans USA 28.8 30.2 25.4 2.9 2.9 2.8 Argentina 15.3 16.3 16.7 2.7 3.0 2.9 Brazil 22.0 20.8 21.6 2.6 2.8 2.8 China 9.6 9.3 8.6 1.8 1.7 1.6 World 92.7 94.6 91.3 2.4 2.5 2.4 Palm Oil Indonesia 4.1 4.5 5.0 3.9 3.7 3.8 Malaysia 3.7 3.8 3.9 4.3 4.2 4.4 Thailand 0.3 0.4 0.5 2.5 2.5 2.6 World 9.9 10.5 11.3 3.8 3.6 3.7 Rapeseed EU-27 4.7 5.4 6.5 3.2 3.0 2.8 Canada 5.3 5.2 5.8 1.8 1.7 1.5 China 7.2 7.0 6.5 1.8 1.8 1.6 India 7.1 6.4 5.8 1.0 1.0 0.9 World 27.6 27.2 29.0 1.8 1.8 1.7

Source: Oil World On the other hand, consumption on worldwide basis has increased at a CAGR of 6% over the last five years due to increased consumption from China and increased usage for biodiesel’ (see Exhibit 22).

KS Oils


Exhibit 22: …with increase in consumption from China and for fuel Mn Tonnes 2003 2004 2005 2006 2007 2008E FY03-08 CAGR Overall Production 95.8 102.4 111.4 118.3 122.2 128.6 6.1%

% change 7.0% 8.8% 6.2% 3.3% 5.2% Consumption

Soybean oil Brazil 5.2 5.6 5.6 5.4 5.9 6.1 3.1% China 4.7 4.5 5.4 6.1 6.3 6.8 7.5% USA 8.4 7.7 8.8 9.2 9.3 9.6 2.9% World 30.2 30.0 31.6 33.5 35.6 38.0 4.7% Food/feed 29.5 29.3 30.7 31.6 33.0 34.9 3.4% Industrial cons 0.7 0.7 1.0 1.9 2.5 3.2 34.6% Palm oil China 3.5 3.7 4.4 5.0 5.1 5.8 10.5% EU-27 2.9 3.3 3.9 4.0 3.4 3.7 4.9% India 4.2 3.6 3.4 3.1 3.8 4.3 0.2% Indonesia 3.6 3.8 4.0 4.4 4.6 4.8 5.9% World 27.6 29.3 32.6 35.1 36.9 40.5 8.0% Food/feed 22.8 23.5 25.5 27.3 29.0 31.9 6.9% Industrial cons 4.8 5.8 7.1 7.7 7.9 8.6 12.4% Rapeseed oil China 3.7 4.4 4.8 4.5 4.9 4.3 3.0% India 1.4 2.1 2.1 2.3 2.1 2.0 6.5% World 12.3 14.3 15.6 17.0 18.0 18.4 8.4% Food/feed 11.0 12.5 12.9 13.1 13.1 13.5 4.1% Industrial cons 1.3 1.9 2.7 3.9 4.9 5.0 30.1% Other oils 25.3 26.7 28.2 29.7 30.7 30.5 3.8% Total 95.4 100.3 108.0 115.2 121.2 127.5 6.0% % change 5.1% 7.6% 6.7% 5.2% 5.2%

Source: USDA

Firm pricing outlook makes investments in palm plantations attractive: Given this demand/supply balance, we expect the prices to remain firm. This also makes investments in plantations an attractive proposition. KSO has also announced acquisition of 20,000 hectares of land on 30-year lease basis (renewable for another 50 years) at a total investment of Rs2.3 bn (c.US$3,000/hectare). Given the cost of production of US$300/tonne of crude palm oil, the current pricing of US$1,100/tonne of Crude Palm Oil (CPO) is fairly attractive. We believe this land can be valued at US$7,000-8,000/hectare, even with conservative assumptions (see Exhibit 23).

KS Oils


Exhibit 23: Palm plantations are attractive Units Yield Realisation/Cost CPO Rs/tonne 22% 28,000 Kernels 4% Kernel oil Rs/tonne 38% 30,800 Palm pulp Rs/tonne 50% 5,200 Raw material cost Rs/ha 8,000 Other fixed costs Rs/ha 4,000 Fixed investment Rs/ha 120,000

Source: Industry, JM Financial ASK Securities Estimates Thus, KSO’s 20,000 hectares could be worth US$130 mn. We note that this is c.20% of KSO’s current market capitalisation. Annually, this land can generate profits of US$2,000/hectare – thus contributing c.Rs1.6 bn or c.60% of our FY10 estimates.

KS Oils


Palm plantation in Indonesia Indonesia and Malysia currently supply 90% of world’s crude palm oil. This is because palm grows in tropical climate and Indonesia and Malaysia are situated ideally near the equator providing the right climatic conditions for palm trees.

Indonesia and Malaysia control 86% of world’s output Acerage (Mn ha) Yield (tonnes/ha) Output (Mn tonnes)

2005-06 2006-07 2007-08E 2005-06 2006-07 2007-08E 2005-06 2006-07 2007-08E

Indonesia 4.1 4.5 5.0 3.9 3.7 3.8 16.1 16.7 18.8

Malaysia 3.7 3.8 3.9 4.3 4.2 4.4 15.9 15.8 17.3

Thailand 0.3 0.4 0.5 2.5 2.5 2.6 0.9 1.0 1.2

World total 9.9 10.5 11.3 3.8 3.6 3.7 37.1 38.1 42.2 Source: Oil world

Indonesia is an archipelagic nation encompassing over 10,000 islands. The five main islands of the archipelago are Sumatra, Java, Borneo, Sulawesi, and Western New Guinea. Indonesia's total land area is slightly greater than 1.2 million square miles. Palm oil producing areas have slowly expanded since the early 20th century when the palm was first introduced. Even though the bulk of Indonesia’s production remains on Sumatra, according to some sources, 70% to 80% rapid expansion is occurring on the island of Borneo; the second largest producing area in Indonesia. In recent years, there has been a growing expansion of palm oil plantations on the island of Borneo —particularly in Central and West Kalimantan. This continued increase in production is a result availability of land on Borneo and other previously non-developed areas that has allowed Indonesia to become the top producer. The current (December) USDA production forecast of 2007/08 Indonesia Palm Oil is 18.3 million tons - up 10% YoY.

KS Oils


Initiate with Buy

KSO’s net profit grew at a CAGR of 232% for FY06-08. The company has also been generating return on capital employed of over 20% for last three years. Despite the 350% and 270% YoY net profit growth in FY06 and FY07, the stock has got re-rated only in June-July 2007 to over 15x 1-year forward. It is trading at 18x FY09E EPS and 9x FY10E EPS. Hence, we believe the stock is only partly factoring-in the outlook for FY09 and leaves lot of upside for its FY10 potential. Further, we also believe that the current stock price is not capturing the value of KSO’s Indonesian palm plantation. KSO’s foray into palm will significantly alter the company’s business composition and provide upsides to investors, as this will be a high margin business and should drive earnings growth over the next 4-5 years. We initiate with a Buy recommendation and March 2009 target price of Rs115, based on 15x FY10E EPS. Excellent past performance… KSO has reported 184% growth in net profits over FY06-08, on the back of 83% CAGR in sales (see Exhibit 24). Exhibit 24: Robust profit growth of last three years…

Rs mn FY06 FY07 FY08 FY06-08 CAGR Sales 6,082 10,875 20,421 83% % change 34% 79% 88% EBITDA 272 927 2,252 188% margins 4.5% 8.6% 11.0% % change 97% 241% 143% PAT 152 573 1,227 184% margins 2.5% 5.3% 6.0% % change 353% 278% 114%

Source: Co Annual Reports, JM Financial ASK Securities

This is driven by increase in volumes, higher prices and improving margins on the back of better product mix and improving market dynamics (see Exhibit 25). Exhibit 25: …on the back of improving EBITDA margins

Rs mn FY06 FY07 FY08 FY06-08 CAGR Branded 2,926 6,560 12,234 78.2% % of total 48.1% 61.1% 59.9%

Retail Packs 586 2,308 6,306 110.9% % of total 9.6% 21.5% 30.9% Bulk Packs (above 15kg) 2,329 4,253 5,633 55.8% % of total 38.3% 39.6% 27.6%

Non branded 3,156 4,169 8,187 51.3% % of total 51.9% 38.9% 40.1% Total Sales 6,082 10,729 20,421 83.2% EBITDA Margins 4.5% 8.5% 11.0%


…re-rating only since June 2007 Despite 350% and 270% increase in net profit in FY06 and FY07, respectively, the stock got re-rated only in June-July 2007, probably as investors were awaiting consistent performance.

KS Oils


Exhibit 26: Stock got re-rated only since June-07

FY05 FY06 FY07 FY08 EPS 0.4 0.9 2.2 3.4

% change 149% 248% 16% 23% PE on avg price -1-yr fwd 5.0 4.7 7.7 19.2 PE on avg price-2-yr fwd 2.3 1.8 4.9 15.6

Source: Company Annual Reports, JM Financial ASK Securities Exhibit 27: 1-yr forward PEx has expanded to over 17x

0

20

40

60

80

100

120

140

Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08

Share Price

20 x

24x

16 x

12 x

8 x

4x

Source: Capitaline, Bloomberg, JM Financial estimates This compares with a stable PEx for RS throughout the period, as shown in Exhibit 28. Exhibit 28: Ruchi’s PEx has remained in a narrow band

FY05 FY06 FY07 FY08 EPS 2.3 3.8 4.6 7.3

% change 32% 69% 22% 57% PE on avg price -1-yr fwd 14.6 14.4 13.3 12.6 PE on avg price-2-yr fwd 8.6 11.8 8.5


We believe KSO’s higher growth rate justifies higher PEx historically, especially from FY08 when the gap in profit numbers reduced.

KS Oils


Exhibit 29: KSO is rapidly bridging gap with Ruchi

Rs mn FY05 FY06 FY07 FY08 KS Oils EBIDTA 138 272 927 2252 % change 97% 241% 143% Net profit 33 152 573 1227 % change 361% 277% 114% EPS 0.09 0.43 1.61 3.44 % change 48% 353% 278% 114% Ruchi Soya EBIDTA 714 1680 2153 3391 % change 135% 28% 58% Net profit 505 851 1036 1626 % change 69% 22% 57% EPS 2.95 4.4 4.64 7.29 % change 5% 49% 6% 57% Difference in net profit 1430% 460% 81% 33%


Earnings growth is likely to be a stellar even for FY08-10E We expect KSO’s net profit to grow at 48% CAGR over FY08-10E on the back of expanded volumes (see Exhibit 30). Exhibit 30: Expanded capacities will drive profit growth Rs mn FY08 FY09E FY10E FY08-10 CAGR Capacities ('000TPA)

Oil Mill 443 923 1,568 88.2% Refinery 115 240 390 84.2% Wind Mill (MW) 9 33 48 136.4%

Net Sales 20,421 30,283 45,737 50% % change 88% 48% 51% EBITDA 2,252 2,934 5,127 51% margins 11.0% 9.7% 11.2% % change 143% 30% 75% PAT 1,227 1,508 2,691 48.1% margins 6.0% 5.0% 5.9% % change 114% 23% 78%

Source: Company, JM Financial ASK Securities We expect EBITDA margins to slightly decrease in FY09E, to neutralise the effect of favourable raw material-finished product situation in FY08, offset by higher capacities allowing more in-house production reducing lower-margin trading business.

KS Oils


Exhibit 31: Organised share has increased to 25% 000 tonnes FY05 FY06 FY07

Mustard seeds Consumption 5,455 6,210 5,657 Organised players 546 621 1,131 % share in total 10% 10% 20% KS Oils 82 83 183 % share in total 2% 1% 3% % share in organised sector 15% 13% 16%

Source: Industry, USDA, JM Financial ASK Securities Even with this growth in the mustard business, we expect KSO’s market share to remain stable at 25-30%, but the organised market would increase its share from 20-25% to 70% (see Exhibit 32). Exhibit 32:…and will increase to 70%, driving sales growth

000 tonnes FY08 FY10E FY11E FY12E Mustard seeds Consumption 4,907 5,200 5356 5517 Organised players 1,227 3,640 4,017 4,303 % share in total 25% 70% 75% 78% KS Oils 367 941 1035 1138 % share in total 7% 18% 19% 21% % share in organised sector 30% 26% 26% 26%

Source: Industry, Agricultural Outlook (FAPRI) 2008, JM Financial ASK Securities In the next two years, the company is planning to expand its distribution network from the present 450 wholesalers and 45,000 retailers to almost 650 wholesalers and 200,000 retailers. It also plans to expand its marketing team from 80 people currently to 150. We believe KSO’s volume can continue to grow at 10-12% for the next 3-4 years and 5-6% thereafter – in line with the base growth. Palm plantation provides further re-rating potential Most importantly, we believe KSO is well positioned to create value in the palm plantation business. It is likely to invest Rs2.3 bn over 2-3 years for 20,000 hectares from which it can generate profits of Rs1.6 bn – c.60% of our estimated profits for FY10E. Further, global peers such as IOI Corp, Sime Darby, etc are trading at 15x 1-year forward consensus EPS (see Exhibit 33).

Exhibit 33: Global valuation comparables P/E EV/EBITDA ROE (%) PEG Ratio

M Cap ($ bn)

Revenue ($ mn) FY08 FY09 FY10 FY08 FY09 FY10 FY08 FY09 FY10 FY09 FY10

IOI CORPORATION BHD 13.7 2,781 21.1 18.3 18.2 14.9 13.0 13.0 26.1 25.0 21.8 0.9 0.8 KUALA LUMPUR KEPONG BHD 5.7 1,562 16.4 15.7 15.0 11.6 10.9 10.6 21.0 20.1 17.7 0.7 0.6 SIME DARBY BERHAD 17.8 8,776 16.1 13.3 12.8 9.9 8.4 8.3 17.4 18.7 17.6 0.8 0.7 INDOFOOD AGRI RESOURCES LTD 2.6 704 0.0 0.0 0.0 6.8 6.2 6.0 19.3 17.7 16.4 0.2 0.2 WILMAR INTERNATIONAL LTD 23.3 12,015 35.2 30.7 26.6 17.4 15.2 13.3 11.5 11.6 11.7 2.0 1.7 ASTRA AGRO LESTARI TBK PT 4.2 645 12.9 11.6 11.2 8.0 7.4 6.9 62.0 52.4 44.1 0.6 0.6 PP LONDON SUMATRA INDONES PT 1.5 314 11.1 10.9 12.0 7.2 6.9 6.7 43.0 33.2 26.0 1.1 1.1 SAMPOERNA AGRO TBK PT 0.8 173 11.7 11.0 11.0 6.8 6.4 6.9 36.7 26.1 22.1 0.6 0.5

Source: Bloomberg estimates

KS Oils


These stocks also got re-rated over the last two years on the back of increasing CPO prices. On relative basis, KSO is trading very cheap as it is likely to offer far higher earnings growth over the next 4-5 years. The lowest EV/hectare (see Exhibit 34) is trading at EV/ha over $16,000. Even considering 50% discount, we believe KSO can provide significant upside from its recent land acquisition. Exhibit 34: EV of global Palm Oil companies

Enterprise Value Palm Plantation Area EV / hectare Mn USD Hectares USD IOI Corporation Bhd 14,534 148,871 97,631 Kuala Lumpur Kepong Bhd 5,173 134,981 38,324 Sime Darby Berhad 18,076 543,579 33,254 Indofood Agri Resources Ltd 3,315 161,457 20,533

Wilmar International Ltd 20,427 237,000 86,191

PP London Sumatra Indones Pt 1,525 92,533 16,482 Source: Bloomberg, company annual reports, JM Financial ASK Securities Buy for over 50% upside in 12 months We initiate coverage with a March 2009 target price of Rs115, based on 15x FY10E EPS of Rs7.5. This gives 50% upside within a year, and hence we recommend a Buy. The upsides could be higher by at least 20% if one considers the value of palm plantation. Risk to our recommendation Edible oils are traded as commodities with prices of loose packs fluctuating daily and branded products revised every week. Further, companies use hedging to cover their commodity risk. Given the nature of the business, it is difficult to predict earnings accurately as it depends on prices at which companies buy their raw materials, the number of months of inventory they build and the prices at which they forward sell finished goods. We believe KSO’s earnings are relatively less susceptible, as it is able to forward-contract its finished products in the physical market with its distributors. This will ensure at least some base margins. Further, higher share of branded business and more in-house production will also help boost its margins. KSO’s margins could suffer if global demand-supply outlook improves and overall price table for edible oils falls. This may happen if oil prices recede to below US$70/barrel. With the increasing use of biofuels and increasing global consumption of oil, we believe prices of edible oils will remain firm for a longer period.

KS Oils


Appendix on biofuels The price of crude oil has nearly tripled since 2003 (see Exhibit 35). Exhibit 35: Crude oil prices have nearly tripled

0

15

30

45

60

75

90

105

120

Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

USD/barrel

Source: CMIE Higher crude prices lead to higher petrol/diesel cost, heating oil cost; impacting various other costs. Along with high prices, there is an increasing concern on global warming due to carbon emission. As a result, biofuels have gained traction as a substitute for petrol/diesel. Exhibit 36: Current global biofuel use (2008)

million gallons Biofuels consumption Overall oil cons Oil cons (% of

total world) Oil for

trasnport Biofuel usage

1 2 3 4 5=1/4 USA 11,883 420,843 29.4% 289,403 4.1% EU 3,341 211,554 16.3% 109,829 4.9% Brazil 5,004 75,958 5.7% 18,947 27.5% India 539 43,028 3.1% 12,686 4.2% China 303 117,498 8.4% 46,728 0.6%

Source: World Energy Outlook2007, US & World Agricultural Outlook

Various governments have set standards for compulsory substitution of biofuels for petrofuels, to reduce dependence on oil imports and to have cleaner alternatives. Biofuels are carbon neutral, as they release carbon absorbed during its lifetime.

KS Oils


Exhibit 37: Global biofuel adoption targets

Country Current Capacity Targets Main source of Biofuel Biofuel policies (explicit)

US 18.4 billion litres of ethanol (2006), 284 million ltres of biodiesel (2005)

28 billion litres (2012) of ethanol and 1 billion litres of cellulosic ethanol by 2013

maize and future cellulosic sources

excise duty credit, mandatory blending, capital grants, vehicle subsidies

Brazil 17.5 billion litres of ethanol (2006)

25% blending of ethanol (has been in effect for long time), 2.4 billion litres of biodiesel by 2013

sugarcane, soybean mandatory blending, capital subsidies, vehicle subsidies

EU 3.6 billion litres of biodiesel (2005), 1.6 billion litres of ethanol (2006)

5.75 percent of transportation fuel on energy basis by 2010

rapeseed, sunflowerseed, wheat, sugarbeet and barley

excise duty credit, mandatory blending, capital grants, vehicle subsidies, funding for R&D

China 1.2 billion litres of ethanol (2006) na* maize, cussava,

sugarcane subsidies and tax breaks but only for non grain feedstock

Japan insignificant 360 million litres by 2010 and 10% biofeul by 2030 imported ethanol excise duty credit

India 200 million litres of ethanol (2006)

5% ethanol in select cities and 10% biodiesel by 2012 **

sugarcane molasses, Jatropha (in future)

mandatory ethanol blending, capital subsidies

Source: World Bank Report 2007, * not found, ** biodiesel policies has not yet passed into law in India and is merely a government preference at this point Brazil currently uses 27% biofuel for its transportation needs. This has been possible due to low manufacturing cost of ethanol (from sugarcane) and encouraging usage of flex-fuel cars. Exhibit 38: US is the largest producer of Biofuels

million gallons Biofuels production Biofuels consumption

Ethanol Biodiesel Total

% of total world prodn

Ethanol Biodiesel Total

% of total world

consumption USA 8,722 588 9,310 49% 11,480 494 11,883 56% EU 1,217 1,558 2,775 15% 1,353 1,988 3,341 16% Brazil 5,227 280 5,507 29% 4,792 212 5,004 24% India 594 - 594 3% 539 - 539 3% China 429 - 429 2% 303 - 303 1% World 16,336 2,692 19,028 100% 18,467 2,694 21,161 100%

Source: US & World Agricultural Outlook (FAPRI) 2008

While ethanol for Brazil is competitive as against petrol at oil price of US$35/barrel, the current oil price makes the usage of various other crops for biofuel also possible. Exhibit 39: Palm oil cheapest input for biodiesel

Yield tons per hectare

Oil (Ltrs) per hectare Conversion

Biofuel (ltr) per hectare

Price of edible

oil $/ton

Cost $/ton of biofuel

Cost $/hectare

soya 2.9 520 1.05 544 1,400 1,575 3028

rapeseed 2.8 1159 1.04 1200 1,800 2,046 1765

palm oil 18.0 3960 1.25 4950 1,000 941 238 Source: Industry, JM Financial ASK Securities

KS Oils


We estimate that in order to meet even 5% blending, acreage would need to increase by 25%. Exhibit 40: Land requirements to increase by 25% to meet 5% standard

Diesel Diesel (m litres/year) (m litres/year)

Diesel consumption (Mn litres) 805,000 Biodiesel required (Mn litres) @ 5% blending 40,250 Option 1 Option 2 Million hectare land required for % of biodiesel 100% 50%

Soybeans (Mn hectares) 74 37.0 % of world soybean acreage in 2008 81% 41% Rapeseed (Mn hectares) 34 16.8 % of world rapeseed acreage in 2008 116% 58% Palm Oil (Mn hectares) 8 4 % of world palm acreage in 2008 72% 36%

Source: IEA, Industry, JM Financial ASK Securities We thus believe that in the longer term too these crops/edible oils will continue to have enough demand, such that even if oil prices drop to US$70/barrel, there will be demand for biofuels. At the same time, biofuels are currently being subsidised by various governments and this subsidy burden will increase as prices shoot up, discouraging their use. Nevertheless, we believe that these prices are likely to remain firm over a longer period.

KS Oils


Financial Tables Profit & loss statement (Rs mn)

Y/E March FY06 FY07 FY08E FY09E FY10E Net sales 6,082 10,875 20,411 30,283 45,737 Growth (%) 34 79 88 48 51 Other operational income - - - - - Increase/(Decrease in stock) (226) 288 (679) - - Raw material consumption cost 5,517 8,937 15,702 25,242 37,370

Power cost 86 113 163 242 366 Other Manufacturing Expenses 165 218 367 545 823

Administration Exp 131 154 250 350 450 Selling and distribution exp 138 238 612 969 1,601 EBITDA 272 927 2,252 2,934 5,127 EBITDA (%) 4.5 8.5 11.0 9.7 11.2 Growth (%) 97 241 143 30 75 Other non-operational income 4 11 105 100 100 Depreciation & amortisation 29 45 119 250 350 EBIT 247 892 2,238 2,784 4,877 Interest (income)/exp (net) 72 154 384 600 800 Pre tax profit 176 739 1,854 2,184 4,077 Taxes 24 166 627 743 1,386 Tax rate 14% 22% 34% 34% 34% Extra (income)/exp (net) - - - - - Net profit 152 573 1,227 1,442 2,691 Adjusted net profit 152 573 1,227 1,442 2,691 Margin (%) 2.5 5.3 6.0 4.8 5.9 Diluted share capital (# mn) 178 261 356 356 356 EPS (Rs) 0.9 2.2 3.4 4.0 7.6 Growth (%) 149 158 57 17 87

Source: Company, JM Financial ASK Securities.

Balance sheet (Rs mn) Y/E March FY06 FY07 FY08E FY09E FY10E

Share capital 85 459 832 356 356 Reserves & surplus 383 1,444 5,621 8,013 10,644 Networth 468 1,903 6,454 8,369 11,000 Total loans 874 1,002 3,000 6,109 8,629 Sources of funds 1,341 2,905 9,454 14,479 19,629 Intangible assets - - - - - Fixed assets 597 1,378 4,728 7,228 8,228 Less: Depreciation/amortisation 159 203 322 572 922 Net block 438 1,175 4,406 6,656 7,306 CWIP - 135 - 1,150 2,300 Investments - - - - - Deferred tax assets/(liability) - (156) (250) (350) (450) Current assets 1,821 3,234 6,869 9,398 13,844 Inventories 1,552 2,477 4,484 7,467 11,278 Sundry debtors 154 139 1,206 1,245 1,880 Cash & bank balance 61 131 634 140 140 Loans & advances 54 487 545 546 547 Current liabilities & provisions 921 1,508 1,596 2,375 3,372 Current liabilities 875 1,272 1,296 2,075 3,072 Provisions and others 46 235 300 300 300 Net current assets 903 1,727 5,273 7,023 10,473 Others (net) - 24 25 - - Application of funds 1,341 2,905 9,454 14,479 19,629


Cash flow statement (Rs mn) Y/E March FY06 FY07 FY08E FY09E FY10E Net profit 152 573 1,227 1,442 2,691 Depreciation/amortisation 29 45 119 275 350 (Inc)/dec in working capital (226) (754) (3,043) (2,244) (3,450) Others - 132 94 100 100 Net cash from operations (46) (3) (1,602) (427) (309) (Inc)/dec in investments - - - - - Capex (150) (916) (3,215) (3,650) (2,150) Others Cash flow from inv. (150) (916) (3,215) (3,650) (2,150) Inc/(dec) in capital 66 901 3,374 524 (0) Dividends paid + div tax (12) (39) (40) (50) (60) Inc/dec in loans 132 128 1,998 3,109 2,519 Others (2) (2) (11) 0 (0) Financial cash flow 185 989 5,321 3,583 2,459 Net inc/dec in cash (11) 70 503 (494) - Opening cash balance 72 61 131 634 140 Closing cash balance 61 131 634 140 140


Key ratios Y/E March FY06 FY07 FY08E FY09E FY10E ROCE (%) 18.2 32.6 24.0 15.4 18.9 Adjusted ROCE (%) 16.9 19.2 13.8 12.2 16.2 ROE (%) 32.4 30.1 19.0 17.2 24.5 Debt-equity ratio (x) 1.9 0.5 0.5 0.7 0.8 Valuation ratios (x) PER 88.0 34.1 21.8 18.5 9.9 PBV 28.5 10.3 4.1 3.2 2.4 EV/EBITDA 3.0 0.9 1.1 2.0 1.7 EV/Sales 13.4 8.0 11.6 19.7 18.6 Turnover ratios (no.) Debtor days 9.2 4.7 21.6 15.0 15.0 Inventory days 93.2 83.1 80.2 90.0 90.0 Creditor days 54.3 46.0 28.2 27.1 27.1


KS Oils


JM FINANCIAL ASK SECURITIES PRIVATE LIMITED MEMBER, BOMBAY STOCK EXCHANGE LIMITED AND NATIONAL STOCK EXCHANGE OF INDIA LIMITED

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The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that:

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country: india sector: edible oil ks oils · 2017-07-25 · ks oils 15 may 2008 jm financial ask...

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