Piccadily Agro Industries Ltd

Starting a new thread fro Piccadily Agro Industries on behalf of Manish B Gajria. Think it deserves some dedicated attention.

Here is what Manish had to say about Piccadily when he introduced the stock idea in his My top 5 picks

Piccadilly Agro - A misunderstood / undiscovered story. Considered and valued as a sugar company, but has transformed into a brewery. Derives over 70% of its revenues from the brewery segment and growing well, hence a perfect candidate for PE rerating. Available in a reasonable range of 36 to 40.

As mentioned earlier, my notes on what interested me towards Piccadilly other than its financials and good performance off late.

Till FY 2007 there was nothing much to talk about Piccadilly. They were like most other sugar companies from the north, making a loss. At the end of FY 2007, the company was only into sugarcane crushing and thus into production of raw sugar, however they had started with the setting up of liquor facility. So, till FY 2007 they were largely a loss making company. For FY 2008 the company had started with the liquor production and sold some 2.17 million cases. In that year the company made a net profit of just Rs 12 million but that was on account of 50 million loss from Sugar Division. At the end of FY 2008 the company had some 270 million capital work in progress, so they were still expanding their liquorfacility. For FY 2009 the company sold 2.86 million cases with a turnover of 480 million. The company achieved Rs 54 million profit from liquor and 32.9 million profit from Sugar i.e. around 87 million net profit. At the end of FY 2009 the company had 430 million capital for work in progress. This was again for the expansion of liquor unit. For FY 2010 the company did a turnover of Rs 820 million from liquor unit which is almost a 70% increase in revenue for liquor unit over FY 2009. The company achieved a Profit before Tax of around 170 million from liquor unit and assuming 33% tax, a net profit of Rs 113.9 million, so more than 100% increase in net profit from the liquor unit of the company. At the end of FY 2010 the company has close to Rs 600 million debt on its books, however most of it has gone towards expansion, as its added to the gross block. Between FY 2009 and FY 2010 the gross block of the company increased by Rs 330 million from Rs 830 million to Rs 1160 million, while there is another Rs 130 million capital work in progress. This clearly shows that there is some more expansion underway which would get added to the existing capacities in the days to come.

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The growth picture looks promising, as well as the improved profitability. There seems to be very good traction in business performance if you study the quarterly results for FY11

Margins have been constantly expanding with OPM reaching and staying over 21% for 1st 3 qrs of FY11. net margins between 11-12%. So its Net Margins are actually higher than the OPMs achieved by a leader in country liquor-Rectified spirit/ENA, viz Globus Spirits which currently boasts the largest capacity for this segment?

We need to understand what is happening in the company. What are the sources of this kind of profitability, compare players of similar volumes and capacities. Valuation-wise it doesn’t look like this is all factored in! from a first glance at numbers.

Lets dig more

-Donald

teh co belong to infamous Vinod Sharma/ manu sharma family of who killed jessica fame.

Indian liquor sector is one of the most corrupt sector with lot of underhand dealings.buyers beware.

I found following article which can be a useful backgrounder for all of us. Let us collect the facts -forgetting about the reccos, for the moment:)
http://www.premiuminvestments.in/reader-s-nook-50452/112/Piccadily-agro-industries.html
Dec 20, 2010 05:21 pm
CCADILY AGRO INDUSTRIES
null

By Hemant Gupta

Rationale for Recommendation:Being in business of Sugar and Country Liquor, PAIL is going for IMFL which is high growth area. PAIL has already achieved EPS of 4.65 in H1 which is higher than EPS of entire previous year. Promoters have increased their stake through open market purchase by nearly 10%. Now, promoter's stake stands at 68.9%. And, scrip has already reacted sharply from previous month's high of Rs 53.80. Stock is available at 3.60xFY11E Eps which is much much lower than peer group companies.

BACKGROUND: Set up in 1994, PAIL started to manufacture and their by-productslike molasses, bagasse. Company has been promoted by HDIDC and well know Piccadily Hotels P Ltd. Mr Vinod Sharma is main promoter of the group who was earlier member of Parliament in Rajya Sabha in 1990s and well-known for their financial and political clout in North India. However, some conservative investors have been avoiding this scrip as son of promoter had been indicted in a murder case and is serving jail term.

Earlier, only sugar unit was operational but started liquor unit in late FY08 which has led to sharp improvement in its performance as company's country liquor has emerged amongst leading brands in Haryana.

Till FY07, PAIL was a loss-making unit due to dependence only on sugar. For FY08, company had started with liquor production and sold 21.77 lacs cases. During that year, despite 5 cr loss from sugar division, PAIL achieved Net Profit of 1.20 crores which means liquor business started earning profits from inception.

For FY09, PAIL sold 28.6 lac cases with sale of 48 crore. It achieved, during the year, 3.29 cr profit from sugar division and 5.40 crore profit from liquor division.

2009-10 2008-09 2007-08

Rs Cr Rs Cr Rs Cr

Net Sales 169.90143.20 117.90

Depreciation 5.70 3.95 3.60

Net Profit9.84 9.00 1.19

Equity23.59 23.5923.59

Cash Profit 15.54 13.95 4.79

During 09-10, company provided 6.60 cr for deferred tax. Hence, actual Cash profit during the year was Rs 22 crores. Total tax provision in 09-10 stood at 10 cr as against 2.89 cr in 08-09.

It is clear that performance of PAIL has improved considerably in last 3 years. This improvement is mainly due to country liquor business which is contributing to the bottomline.

CURRENT PERFORMANCE:

H1/2010-11 H1/2009-10

Net Sales 92.23 69.15

Net Profit 10.96 7.39

EPS Rs 4.65 3.13

Piccadily has reported excellent results for H1 although sugar division reported loss for both quarters. Net Profit is up 40% upon YOY Basis.

SEGMENTWISE RESULTS:

Net Sales:

  • Sugar 29.17 34.95

Other/Liquor63.95 34.36

Profit/Loss before Int/tax:

  • Sugar -2.50 2.48
  • Other/Liquor 19.296.49

Thus, in H1, Piccadily has reported 64 cr worth sales from liquor division which is 100% growth over H1 of previous year. And, profit before interest/tax from liquor division is higher by 200%.

At the end of FY10, Company had nearly 60 cr debt which has gone for expansion of liquor business. Gross Block of company increased from 83 crores to 116 crores, with another 13 crore capital work in progress

Buoyed by success of country liquor, Piccadily is going for IMFL business which is high growth area. InIndia, country liquor industry size is approx 225 million cases and has been stagnating since 2 years. However, IMFL segment is growing at blistering pace of 12-15% since 5 years and is the fastest growing and most profitable segment inalcoholic beverages industry. IMFL market is growing rapidly due to several factors like overall economic growth, larger young population, easier availability of liquor at growing no of retail outlets, rise of female participation, product innovation etc. IMFL is expected to maintain growth tempo of 12-15% for years to come. According to a recent survey, India's alcoholic drinks marekt is estimated to grow at 62% to about 93000 crores by 2014 from around 57,000 crores in 2009 and with at least half of Indian population under 25 years of age, industry has huge potential in first-time consumers for years to come. Looking at huge potential of IMFL, Piccadily has much brighter future.

FUTURE OUTLOOK:

2010-11E 2011-12E

Net Sales 220.00 280.00

Net Profit 24.00 30.00

Equity 23.59 23.59

EPS Rs 10.1513.15

PE RATIO 3.55 2.75

Stock is available at just;

  • 3.55xFY11E Eps
  • 2.75xFY12E Eps

In alcoholic beverage industry, companies get PE Ratio of 15-30 and Piccadily is undoubtedly the cheapest scrip in the segment. BUYING STRONGLY RECOMMENDED.Scrip has almost bottomedout from recent high of Rs 54, fall of 33%. Investors may buy big quantity andhold on for MEDIUM/LONG term. We advisenot to get tempted to exit at small profits in short term. Medium/Long term investors should gain fabulous/multibagger appreciation. One of the best picks in smallcap segment for almost sureshot multibagger returns. Scrip can be Rs 150/ in less than 2 years

Their tax payments are a little baffling for me:

Q1FY10, Q2FY10, Q3FY10 =0; Q4FY10 tax payment 10.07 Cr on a FY10 PBT of 19.93 Cr or a tax outgo of over 50% for the year

Q1FY11 -tax of 1.40 Cr. Q2FY11 -1.03 Cr, Q3FY11 -2.63 Cr; or a tax payment of 19%, 17%, and 30% for the first 3 qrs respectively. if they are to meet the nominal 33% tax rate, Q4 tax payment will have to ~56% of PBT, which means much higher tax payment with lowered full year EPS??

Someone tracking may please throw light on this aspect.

How does it stack up against a bigger player like globus spirits. Bcos with poor standalone numbers globus might correct some more and offer a good entry point. Even for fy 11 based on consolidated numbers it has done eps of around 17 although these numbers become relevant only after court approval.

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Hi Friends,

I have also started reading on the co since last couple of months and it looks very interesting to me. The way the things are and if the growth continues…it may well be a multi-bagger.

To understand the co better, look at their segment nos. The Sugar operations are stable at around 80-90 Cr but the Liquor business is doing wonders. They have grown theliquorbusiness from a start in 2008 doing a turnover of 36 Cr to 82 Cr last year. For this year they may cross 150 Cr turnover!! Add to this - look at the operating margins at the liquor segment - its around 22-23%.

On the negatives - Yes, due to Manu Sharma link…many investors will continue to avoid. But if one does a check about the group…then they are good at business and are running several businesses successfully. So as an investor, one should look at it as a co. Also, they are the people who can do this liquor businesssuccessful…so that an entry barrier.

Secondly, I doubt if someone would overplay their reported nos in this business :wink:

Views Invited

Regards,

Ayush

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Hi, from what TCX wrote above, its evident that Q-4 results may be muted owing to the higher tax allocation. Could wait for more correction I guess.

There is something immensely good happening at Piccadily Agro, or the numbers are cooked!

I tried plotting the improvement in Country Liquor (and Rectified Spirit+ENA) over the last 7 quarters and the improvement looks fantastic, almost too good to be true (in this kind of a business).

Look at the margins in Country Liquor business -over 25% for last 4 Qrs and almost touching 30% (and this is on EBIT basis, not adding Depreciation which would take it higher; ignores other income which is marginal)

I don't think any of the majors enjoy this kind of margins in this business. If I remember correctly Globus Spirits whose capacity is probably 10x this company enjoys 15-18% margins in Country Liquor segment.

Segment Data

1QFY11

2QFY11

3QFY11

1QFY10

2QFY10

3QFY10

4QFY10

Sugar Sales

Sales

19.37

9.80

12.88

20.41

14.54

7.39

45.33

Profits

-0.77

1.73

-2.17

1.78

0.70

0.41

2.23

Capital Employed

30.74

27.29

17.71

49.43

49.70

31.31

33.11

Rectified Spirit/ENA

Sales

30.27

33.68

42.42

16.34

18.02

22.18

25.70

Profits

9.89

9.40

12.13

3.15

3.70

5.25

6.65

Capital Employed

61.23

57.69

69.66

27.19

30.20

50.89

50.11

Sales % Mix Sugar

39.02%

22.54%

23.29%

55.53%

44.65%

24.99%

63.82%

Contribution % Sugar

-8.46%

15.52%

-21.82%

36.06%

15.98%

7.31%

25.08%

~OPM %Sugar

-3.98%

17.61%

-16.87%

8.71%

4.84%

5.60%

4.91%

~RoCE Sugar

-2.51%

6.33%

-12.27%

3.59%

1.42%

1.32%

6.72%

Sales % Mix Rectified Spirit

60.98%

77.46%

76.71%

44.47%

55.35%

75.01%

36.18%

Contribution % Rectified Spirit

108.46%

84.48%

121.82%

63.94%

84.02%

92.69%

74.92%

~OPM % Rectified Spirit

32.66%

27.91%

28.59%

19.28%

20.52%

23.66%

25.87%

~RoCE Rectiifed Spirit

16.15%

16.29%

17.41%

11.59%

12.24%

10.31%

13.26%

Naga - lets try and get a reaction from Globus on the numbers here. What is the secret? if this is sustainable then this is fantastic, if not ....

-Donald
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Hi, could it be that they get raw material cheaply? They are into sugarcane cultivation aswell right? And there is another company, Piccadily Sugar and Allied Industry, which might also be into sugar cultivation. Was Globus backward integrated for mollasses supply?

Rgds

Vinod

Full year EPS ~ Rs11.7!!

[quote="Donald, post:9, topic:909795741"] > There is something immensely good happening at Piccadily Agro, or the numbers are cooked! > > I tried plotting the improvement in Country Liquor (and Rectified Spirit+ENA) over the last 7 quarters and the improvement looks fantastic, almost too good to be true (in this kind of a business). > > at the margins in Country Liquor business -over 25% for last 4 Qrs and almost touching (and this is on EBIT basis, not adding Depreciation which would take it higher; ignores other income which is marginal) > > I don't think any of the majors enjoy this kind of margins in this business. If I remember correctly Globus Spirits whose capacity is probably 10x this company enjoys 15-18% margins in Country Liquor segment. > > 2.23 > > Capital Employed > > | > > 33.11 > > Rectified Spirit/ENA > > | > > 6.65 > > Capital Employed > > | > > 50.11 > > Sales % Mix Sugar > > | > > 63.82% > > Contribution % Sugar > > | > > 25.08% > > ~OPM %Sugar > > | > > 4.91% > > ~RoCE Sugar > > | > > 6.72% > > Sales % Mix Rectified Spirit > > | > > 36.18% > > Contribution % Rectified Spirit > > | > > ~RoCE Rectiifed Spirit > > )- lets try and get a reaction from Globus on the numbers here. What is the secret? if this is sustainable then this is fantastic, if not [/quote]

Hi Donald,

Check the latest results of Piccadily Agro. They are great to say the least. And this is surely not cooked up. I can tell this from the fact that the tax they have paid is 30% of PBT. So nogimmicks or provisioning kind of stuff. This at least shows that the PBT. Even the cash flows look good. Plus dividend too has been increased from expected 10% to 20%.

With passing time I am more convinced about this company and its potential.

Regards,

Manish B. Gajria

Look 30%

Naga

Segment Data

1QFY11

2QFY11

3QFY11

1QFY10

2QFY10

3QFY10

4QFY10

Sugar Sales

Sales

19.37

9.80

12.88

20.41

14.54

7.39

45.33

Profits

-0.77

1.73

-2.17

1.78

0.70

0.41

30.74

27.29

17.71

49.43

49.70

31.31

Sales

30.27

33.68

42.42

16.34

18.02

22.18

25.70

Profits

9.89

9.40

12.13

3.15

3.70

5.25

61.23

57.69

69.66

27.19

30.20

50.89

39.02%

22.54%

23.29%

55.53%

44.65%

24.99%

-8.46%

15.52%

-21.82%

36.06%

15.98%

7.31%

-3.98%

17.61%

-16.87%

8.71%

4.84%

5.60%

-2.51%

6.33%

-12.27%

3.59%

1.42%

1.32%

60.98%

77.46%

76.71%

44.47%

55.35%

75.01%

108.46%

84.48%

121.82%

63.94%

84.02%

92.69%

74.92%

~OPM % Rectified Spirit

32.66%

27.91%

28.59%

19.28%

20.52%

23.66%

25.87%

16.15%

16.29%

17.41%

11.59%

12.24%

10.31%

13.26%

....

-Donald

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Any one can find a connection between Venod Sharma and Soon-N-Sure Holding ltd ??

what i found is Venod sharma holds around 3cr. shares of S-N-S

http://myneta.info/ha2009/candidate.php?candidate_id=43

does this mean last 2 bulk deals of 1.6lk and 3lk shares where S-N-S bought is for venod but in different a/c ??

Hi Jatin,

If one looks at the shareholding of Piccadily Agro, Soon-N-Sure is already a major shareholder of the company in the promoter category.

Promoters have been accumulating the stock since long.

I’m unable to access the past bulk deals of this stock…please give a link.

Thanks & Regards,

Ayush

This may help you

http://www.bseindia.com/Insidetrade_ScripWise.asp?scripcd=530305 Link: http://www.bseindia.com/Insidetrade_ScripWise.asp?scripcd=530305

Thanks, Vishal

Came across their website -http://picagro.com/

As per website Future expansion plans:

The company is planning to set up a 10 KL per day Malt Spirit plant to produce Malt Sprit made from Barley. The company is setting up a food grade CO2 plant supplied by Wittaman of USA. Co2 will be recovered from fermentation process and compressed in cylinder.

Besides this the company has also obtained a license for setting up a Brewery with a capacity of 3,00,000 HLPA expandable to
5,00,000 HLPA.

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Thanks for the updates and staying on top of this one Ayush. The results for Q4 have also been great, but we need to understand that sugar side has boosted the numbers here. This side of the business being cyclical, we surely cannot expect this to be repeated. The comforting factor is that the distillery / liquor side continued its sequential growth - increase in both turnover and profitability. Another good thing is that the contribution from sugar side to the bottomline for FY 11 has been miniscule, just about 6%, while 94% is from distillery / liquor side of the business. Based on we could safely expect a 40% odd growth for FY 12.

And from the announcements, its evident that the company plans to continue with further expansion and backward / forward integration.

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Looks like the stock has bottomed out for now. The management seemed to be pointing out that the high raw material costs would persist for the next quarter or two, during the AGM. However, they also indicated that they could improve over the dismal performance of Q1 FY 12.

That was the bad part. Coming to the good part, the regulatory approval has ben received for the expansion of the brewery facility, and the company has also been able to tie up an additional loan of about 15 crores for the same. This expansion would be operational only by FY 13.

Guess one should keep the stock on their watch list now, and add on any dips, of course after analysing the Q2 FY 12 results, once they are out. But the stock definitely does look very undervalued right now around Rs.28 levels.

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Hi Manish,

Thanks a lot for the input. Its good to know that somebody was present at the AGM.

Will like to know more details and want to speak to you in this regard. Plz forward your no to my email id - ayushmit@gmail.com

Thanks & Regards,

Ayush