karuturi global limited

8/7/2019 Karuturi Global Limited

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Thefundamental

Analysis



Company Profile

� Incorporated in 1994

� Headed by Sai Ramkrishna Karuturi

� Largest producer of cut roses worldwide

� Annual production capacity of around 555ml stems

� 239 hectares under Greenhouse cultivation



Contd «

� Floriculture, agriculture, f ood processing & ISP.

� Expanding their broad base in agri-produce basket.

� Exports to high value markets like Holland, Germany,

UK, Italy, Singapore, Hong Kong, Taiwan, Bahrain,

Muscat, Dubai, Australia, Japan, New Zealand, Brunei &

North America & small portion to India.

� Have made strategic tie-ups as a part of their

aggressive business plans.



Recent Acquisitions

� Acquisition of Sher Agencies, Kenya

Post-acquisition, Sher Agencies has been rechristened Sher Karuturi Ltd.

� Acquisition of Estel Communication Pvt. Ltd.Post-acquisition, Estel Communications has been renamed Karuturi Telecom Pvt. Ltd.

� Acquisition of 54% stake in Flower retail Florista



Business Review

Agriculture

� Full fledged work has started Bako and Gambella sites

in Ethiopia.

� At Bako, land has been cleared & is ready f or

cultivation.

� At Gambella, a nursery was established f or Palm,

which currently has 2 million Palm plants ready f or

transplanting on 20,000 Ha of land



Food Processing

� Karuturi Foods Pvt Ltd (KFPL) has vigorously

marketed its products in various countries throughparticipation in Food trade fairs.

� Expanded the packaging lines to not miss the

opportunities.

� KFPL has entered into a contract to sell pickles

under its own brand name in UK, Af rica and India.



Internet Service Provider (ISP)

� With improving market scenario, KGL is concentrating

back on its services.

� Plans to better service & reach in existing business

areas.

� Karuturi is also looking at a strategic tie up with an ILD

player to expand the service portf olio.



KeyF

inancialsFY08 FY09 FY10 FY11E

Net Sales 3955.40 4458.40 5323.40 8200Net Sales Growth 290.43% 12.72% 19.40% 54.03Expenditures 2778.10 3001.90 3446.40 4800

EBITDA 1177.30 1456.50 1877.00 3400

EBITDA Growth 168.36% 23.72% 28.87% 81.14%EBITDA Margins 29.76% 32.67% 35.26% 41.46%PAT 1027.30 1173.30 1465.10 2400PAT Growth 161.67% 14.21% 24.87% 63.81%Net Profit margins 25.97% 26.32% 27.52% 29.26%Equity 489.3 489.3 489.3 489.3EPS (Rs.) 2.10 2.40 3.00 4.90

Annual All fig. in Rs million

Mar-10 Jun-10 Sept-10 Dec-10

Sales 1746.50 1381.85 1510.80 1608.74

Expenditure 1314.02 966.36 1128.53 1162.22

EBITDA 432.52 415.50 382.27 446.52

PAT 424.99 372.40 426.10 450.08

Q uaterly All fig. in Rs million



Key r isks

Dependence on climatic conditions & rose

floriculture without diversification could be a cause of

concerns.

Withdrawal of tax exemption in 2010 budget will

reduce the profitability of the company.

Promoter holding of more than 50% is consideredsafe f or investors but KGLs promoter holding stand at

26.7%.



Large FII holding can lead to huge volatility in the

stock price. FII holding stands at around 31.5% which

has been a cause of concern.

Foreign currency fluctuations could affect our

projections significantly as company is dependent on

f oreign demand f or sales.

A high leveraged company is likely to be hit first

during economic downturn. Recent acquisitions have

increased the debt-equity ratio of KGL.



Intr insic Value Calculation

Industry PE ratio 15.992

Current PE ratio of KGL 3.25

Face value Re 1

CMP Rs 13PE ratio = 9.621

Projected EPS = 4.90

Intrinsic Value / Projected value of KGL

= PE ratio * Projected EPS= 9.621 * 4.90

= Rs 47.14



On the back of a substantial improvement in economic

situation, which will boost the floriculture business, coupled

with an aggressive f oray into the Agriculturespace, KGL is well placed at this point in time to take

advantage of this increasingly positive scenario. On account

of the huge land bank acquired in Ethopia by the company

and huge demand f or agriculture and f ood crops in the

world , I recommend a BUY with a target of Rs 45.

Valuation

karuturi global limited

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