Jayant Agro Organics: Sept 2011 Results

Jayant Agro Organics reported its Quarterly earnings for quarter ending Sept 30, 2011 on Nov 9,2011. 

Let us see how the company is progressing and try and get a better understanding of how the company is doing.

First a lot of earnings for Jayant agro are in the subsidiary company specially Ihsedu Agro Chem. Ihsedu Agro Chem is a castor seed processing company located in the largest castor growing district in the state of Gujarat.

Ihsedu Agro Chem was a Gujarat Govt company in castor seed crushing. The promoters of Jayant Agro organics bought the company from Gujarat Govt.. increased capacity and added additional processing capacity. 

Castor Seed crushing capacity in the heart of castor growing district is a big advantage for  Jayant Agro specially in castor oil and related business where availability of raw material plays an important part.

So in case of Jayant Agro we will be looking at the "consolidated results" of Jayant as there is a pretty big difference between Jayant Agro standalone result and Jayant Agro consolidated results.

Another unique issue is that Jayant reports 3 months, 6 months 9 months and 12 months consolidated results. 

So Sept 30,2011 result includes the result of June 30,2011. Well lets see what do we have here..

Looking at the results for Year ending March 2010, March 2011 and 3 months ended June 30,2011 and 6 months ended Sept 30,2011 .. it looks like its business as usual with Jayant Agro. 

- PBDIT Margins are consistent around 5%

- Depreciation is decreasing in a gradual fashion.

- Interest payments are steady and hovering just below 2% level.

- Taxes are also around 1%

- Net Profit is also pretty steady at 2%

So when we look at the margins the business is making steady income and everything is on autopilot. 

On the sales front the company sales are increasing by leaps .. 

Year end sales March 2011 is: 1171.99Cr

6 months sales Sept 30,2011 is: 969.44Cr

6 months sales Sept 30,2010 is: 587.09Cr 

So on a year on year basis sales have jumped approximately 65% on a year-on-year basis.  Infact in 6 months ending Sept 30,2011.. Jayant has already clocked sales equal to 82.7% of sales for year ending March 2011.. So looks like demand is growing by leaps and Jayant is well positioned to supply castor oil and its derivatives to the market.

Interest rates: Looking at the interest rates its amazing that Jayant's interest rates are keeping pace with 65% topline growth.. generally capital requirements are steady across quarters but in case of Jayant we see that capital requirements increase every quarter and culminate with largest capital requirements for the year end figures.. I also remember that in the AGM there were questions raised as to why the interest payments are rising and keeping pace with growth in topline. Management said its under control and its part of doing business.. and not something to be worried.

Well after some more digging it looks like interest payments are about 2.02% of raw material requirements..(steady for March 2010, March 2011 and now Sept 30,2011..)  Interestingly there is a 2% interest rate discount for exporters by GOI .. Since India has high interest rates to keep inflation under check.. just so that exporters are not at a disadvantage exporters are provided with 2% interest rate discount.. Well putting all the  pieces together .. looks like Jayant Agro's interest rates are going to keep  pace with topline growth. so don't worry about it!! (wink wink) 

Interestingly net profit margins are also 2% .. Now that is a question I certainly don't have an answer for.

Conclusion: Jayant Agro is favourably placed with a flood of demand for bio based products. Castor oil and its derivatives because of their unique properties already had a steady demand.. now with this increased awareness for bio-renewable inputs .. Jayant Agro is front and center of a demand tsunami.. We can expect Jayant to report steady profits and also expect higher dividend payouts. 

Ihsedu Speciality chemicals the next generation castor oil derivatives subsidiary has not yet started commercial production. If and when it starts it will improve the margins of Jayant Agro.  Also a sebacic acid plant with 8000MT capacity is considering only 1 shift.. but max capacity could be 3 shifts so we could see 24,000 MT as actual production for sebacic acid and that would translated to some really interesting numbers.. 

(I think I am running way ahead of reality.. considering that the plant has not yet started commercial production :--) )