Gujarat Ambuja Exports: June 2010 Result Review: Strong Buy!!

Gujarat Ambuja Exports:
CMP: 28.50
Market Cap: 390.15Cr
Reserves (March 2010) : 392.58Cr
Debt (March 2009): 90.32Cr
Sales TTM: 1408.75Cr

Gujarat Ambuja Exports has reported its June 2010 Quarterly results and from the first impression we can say the results are fair and in line with the expected results. A deeper review says the results could actually be better than what has been reported. Lets just dive into the details.

1. The Operating profits before depreciation for June 2010 is 10.07% which have improved from 8.87% in June 2009 and are in line with March 2010 (10.24%) operating margins.
2. As mentioned in March 2010 result review Gujarat Ambuja Exports revenue mix is improving with sales increasing for higher margin "Maize Processing Division" and sales reducing for lower margin "Other Agro Processing Division"
-  Maize Processing Division is 32.95% of revenues in June 2010 improving from 26.09% in March 2010 quarter and compared to year end March 2009 (13.47%).
- Other Agro Processing Division which was 75.10% of the revenue mix in year ending March 2009 is now down to 46.70% a sharp drop but we must acknowledge "Other Agro Processing Division" is still the majority and the largest division of GAEL's June 2010 revenues
3. "Other Agro Processing Division" as we just mentioned is still the largest chunk of GAEL's Revenues in June 2010 and as we can see the Operating Profit Margin for "Other Agro Processing Division" in June 2010 is 0.60% which is really very low and looks to be an under reporting of profits. The lowest Operating Margin for "Other Agro Processing Division" from our table of quarterly results of  June2009, March 2010 and yearly results of March 2010, March 2009 is 5.22%. Even an Avg value comes out to be: (0.60 + 9.18+5.33+5.22+5.49)/5 = 5.16%. Assuming 5.16% operating margins for "Other Agro Processing Division" we could expect June 2010 segment profit from sales of 13250.26 is 683.71Lakh (6.84Cr)
PN: this is just an assumption on my part and we are guessing .. cause we must remember GAEL is an Agro Processing Export firm and there could be many external variables which could have actually resulted in a profit margin of just 0.60% .. We can however safely assume that this poor result for "Other Agro Processing division" is an exception and we can expect GAEL's Division to perform better in the future.

So I must conclude that the management has been conservative in reporting its June 2010 quarterly numbers and we can expect GAEL to perform better in the future.

I have another table that I would like to share which is sure to make GAEL shareholders jump with joy.
The GAEL management along with the June 2010 quarterly results has also reported the March 2010 Audited Results and the Audited results for year ending March 2010 report a net profit of 60.03Cr. If we look at the unaudited March 2010 Annual report the Net profit reported was 49.28Cr so the management has been quite modest in not highlighting the 21.8% positive jump in reported Net profit between Audited and unaudited results.
The free reserves of GAEL has also increased from 274.57Cr in March 2009 to 392.58Cr which is 118Cr addition to reserves in one year!! Exceptional Value!!

Please find below the Audited and unaudited March 2010 results for everyone to appreciate the surprise present from GAEL management.

Conclusion: Gujarat Ambuja Exports is what we can say "Un-Auditably HOT Stock" a "MUST HAVE" value buy in everyone portfolio. The company shares will surely respond to the deep value that GAEL has displayed. I would assume GAEL to report 70-80Cr Net Profit (Audited ;-) for the year ending March 2011 which would be a market cap of 700 to 800Cr at the minimum!!


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