Company: Gujarat Ambuja Exports: Dec 31,2010 Quarterly Results Review

Gujarat Ambuja Exports (GAEL)  CMP: 35.75 (Market Cap: Rs 4.95 Billion) reported its Dec 31,2010 results.

The following are the observations.

Quarter-Quarter Report:

- Topline (Sales) has increased by 63.81% (Rs 6.49 Billion)

- Bottom line has increased by 23.96% (Rs 286.92 Million)

- Largest percentage increase on a quarterly basis has been in other income by 251.21% (Rs 1.74 million). The other income is still very small component of total income and not a cause of worry.

- Taxes have also increased by 75.36% (Rs 101.5Million) but as a percentage of sales still within normal range (1.56% of sales)

December 31,2010 Vertical Analysis.(VA)

- Company management has not provided a breakup of sales numbers for the various divisions.

- looking at PBDIT number of 7.60% as compared to Sept 2010 9.58% provides us an indication that the increase in sales are driven by the low margin "Other Agro Processing Division" 

GAEL management had stated that December and March quarters are the best quarters for the "Other Agro Processing Division" and for the company .. this is reflected in the fact that Dec 31,2010 has been "till date" the most profitable quarter for the financial year April 2010 to March 2011.

Forward looking statement: 

Looking at last year (year ending March 2010) tax payment of Rs 299.9 Million and the fact that GAEL has paid taxes of Rs 204.4 Million (9 months ending Dec 31,2010) we can expect GAEL to report more than Rs 100 Million in taxes for next quarter March 2011

Also considering the fact that March 2011 is going to be similar to Dec 2010 we can expect GAEL to report Rs 250-300Million in Net profits for quarter ending March 2011 

Full year ending March 2011 will see GAEL reporting Rs 19 - 20 Billion in Sales and Net profit in the range of Rs 900 to 1000 Million. EPS of Rs 6.5 to 7.22. at CMP of Rs 35.75 (F.V Rs 2) and market cap of just 4.95 Billion we are getting a solid company at 26.05% of sales and PE of just 4.95- 5.5

Conclusion: GAEL is a fundamentally sound company with very little leverage(March 2010 longterm debt Rs 180 million). Company has been expanding its capacities with internal accruals and is scheduled to expand its Maize processing capacity by 70% in 2011-2012. Maize/Corn starch derivatives is a high margin business which will help increase GAEL profit margins in the next year. This year figures have been impressive and company has been able to exceed last years profit figures of 600 Million in 9 months and will end the year with 20-30% higher profits. Add to this the 60 paisa dividend with a record date of Feb 11,2011. This is a great stock for the long term.