Jayant Agro Q1 June 2012 Result Review

Jayant agro Q1-2013 results for quarter ending June 2012 were declared on August 13,2012.

Let us review the same..

1. we look at consolidated data as Jayant has materially significant subsidiaries (link to old blog post describing materially significant subsidiaries) 

2. Jayant reports 3,6,9 and 12 months data .. it does not report quarterly numbers so historical comparisons are different..

1. There has been a significant  increase in margin 7.08% PBDIT margin compared to 4.55% (Y-Y) or 5.27% (year ending march 2012)
Is this margin expansion sustainable?.. or..
-Its one time due to a bumper castor crop in India? or
-Its due to the derivatives business which has entered commercial production and amalgamation with Jayant Agro
Only time will tell.. right now we can just appreciate the fact..that its a significant change and we need to confirm this margin expansion sustains in the future.

2. The other more important thing is Sales number for the quarter?.. at 464.62Cr it is less than 482.92 reported in June 2011. This is a cause of concern.. is there a drop in demand? or is Jayant holding back sales to get a better price.. after all.. if you see June 2011 result 4.55% PBDIT margin is less than the year end March 2012 PBDIT margin of 5.27%

I must mention govt has increased Excise duty from 10% to 12% and these numbers are "Net of excise duty"

Clearly June is definitely one of the weak quarters for Jayant. so maybe they are holding out for a better price (my guess)

For consolidated results
Sum of "stock in trade" and "inventory" for June 2012 is: 69.69Cr
Sum of "stock in trade" and "inventory" for June 2011 was: 27.46Cr

So there is a 153% increase in inventory and stock in trade .. this could indicate Jayant holding back sales in the form of inventory and stock in trade.. It could also be an indication that castor seed prices will increase going forward..

Capital Employed Unallocated!! and Castor oil/Derivative margin

1. Capital employed has an unallocated writeback of 30.51Cr (consolidated) and 23.32Cr writeback at standalone result..
If we look at the year end March 2012 unallocated capital employed was 37 lakhs expense..

Now we all know that Ihsedu Speciality chemical was merged with Jayant Agro and the actual merger approval was on July 6,2012.. I Think !! this 30.51Cr is actually some kind of income generated by Ihsedu speciality chemicals during the time period it was commissioned but not yet in commercial production.. (about 1 year) and since accounting is started after commercial production this income generated before commercial production has come in as an unallocated Capital being written back..
(I Assume this ) Could have been implemented as an exceptional One time income also.. but then we know how conservative the promoters are with regards to profit figure!!


2. The other question that I was being asked is .. why? Why is income from Castor oil business more than income from Castor oil Derivatives business?..

June 2012 Segmented Results
Castor oil  : 14.87Cr (Margin 9.67%)
Castor Oil Derivative: 14.09Cr (Margin 4.70%)

June 2011 Segmented Results
Castor oil: 7.45Cr (Margin 6.87%)
Castor oil Derivative: 12.39Cr (Margin 2.49%)

One thing we must understand is the structure of Jayant Agro
Castor oil Derivatives business has been merged with Jayant Agro.
Castor oil processing business is in a 100% subsidiary Ihsedu Agro Chem Pvt Limited.
So at a stand alone level profits are in the derivative business while at the consolidated level the 100% subsidiary castor oil income kicks in..

The important question is .. should Jayant Derivatives business have high margins or should Jayant castor oil business have high margins.. which is beneficial to the company?..

Indian castor oil processing companies are generally into 1 and II generation derivatives(castor oil processing) while Jayant has moved on to III generation derivatives (castor oil Derivatives)
Castor oil derivative competition is with companies that import castor oil from India

By keeping the castor oil  processing margin high:-
It gives Indian companies high margin in castor oil business discouraging them to invest additional capital and enter the castor derivatives business.
It also increases the cost of raw material for importers of raw castor oil ..thereby giving Jayant agro's derivatives business a chance to develop its new business.

So long term its a great idea to keep the castor oil margins high discouraging local derivatives production and hence maintain the location advantage for castor derivatives business.

Bonus profits!! Audited and Unaudited result review March 2012

According to Audited year ending March 2012 (reported in August 2012)
Consolidated Net Profit: 31.35Cr
According to unaudited year ending March 2012 (Reported in May 2012)
Consolidated Net Profit : 27.54Cr
So we have a 13.8%  ie. a 3.81Cr increase in Net profit between audited and un-audited results.. Most analyst will review the March year end numbers under reporting the net profit numbers.


Conclusion: Jayant Agro is just about starting to perform.. with the merger of derivatives business completed with Jayant we should see steady increase in topline and bottomline. We still need to be patient and maybe we need another year or two to see the real fruits of our investment March 2013 can be conservatively be expected to report 40Cr net profit and Ideally 50-54Cr and exceptionally well would be above 55Cr

Right now the idea is to continue accumulating the stock at the deep discount price the stock is available..The promoters are doing its hand over fists.. and we just need to keep on chipping along..

Jayant Agro organics has strong promoters with great vision.. the Udeshi family holds patents for efficient sebacic acid production process till 2020 .. castor processing plant in Banaskantha the largest castor growing district in Gujarat ensuring steady supply of raw material..
Alliance with ITOH oil for marketing green chemicals.. I can see Jayant as a Future Ready!! company. 

The current peak energy situation is breaking down the structure of traditional business while Jayant is going to flourish in this environment..  No GUTS No GLORY!!

=happy investing
whatsup-indianstockideas.blogspot.com

unaudited year end march 2012 result
Audted year end March 2012 result
Q1 2012-13 June 2012 result

Inflation and Growth: Hindu rate of growth?

Inflation is increase in price of goods and services and something to be avoided.. surprisingly inflation at 2-3% is something every nation's central banker aspires for as an ideal inflation target??

Coincidentally the "Hindu rate of Growth" once famous as the rate at which the Indian economy was growing was also 3%

A farmer takes a handfull of seeds worth maybe 1000/= Adds water and fertilizer of say 2000/= and generates goods worth 10,000 in 4-5 months time frame. Farming is not considered as a profitable venture.. when anything that returns 16% ROCE is actually a great thing? why is farming not profitable?

Why is increase in price of food ... food inflation negative while increase in asset prices (house/real estate/stocks) considered positive? Inflation and Growth definition have been force fed .. where "inflation is bad while "Growth" is good when the fact is without "Inflation" there is no growth?

Financial Assets are given higher weightage while core assets such as production of food crops and cotton are labelled as commodities and almost pushed out of the economic picture.. to the level where one is considered a developed country because the economy is basically "Service oriented" 

The Peak Energy crisis which basically means that "Energy is no longer Cheap" changes the priority 180Degrees.. 

Cheap energy prices encouraged "Use and Throw" Replacement mentality..

High energy prices will question if we really need to "Replace" something that is not broken?

Cutting edge was a requirement to stay ahead of competition .. but going forward is it going to be "Live and let live" everybody manages their share of the global consumer market?

Economic growth will tumble (actually negative) while what will remain is basic necessities such as food, clothing and shelter.. with food being the prime economic engine (as its perishable and required on a daily basis) while "Clothing and Shelter" due to their longer shelf life will be smaller part of the future economy..

India has been an energy deprived state and has imported most of its energy requirements.. The original idea was to have an economy that was self sustained which meant "curtail energy demand" (Oil import)

The India of today has allowed the consumer demand to be "open" which is equivalent to taking a child to a toy shop and asking him/her to "Feel free" to buy anything and everything you want.. what we will end up with is a toy shop in our home. Every household has a pvt vehicle (2 or 4 wheels) People go for a "Drive" to kill boredom.. Drive makes people feel productive (I am going somewhere!!) Cars are being marketed as "The First home where I relax"  - Amazingly Nuts!!

What we need is a controlled /directed use of resources to productive assets..Energy Independence is "Key" Renewable energy resources such as hydro electricity must be encouraged. "Telecommute" use public transportation (Rail, waterway, road,air) 

The real economic activity of agriculture production (which happens at the farm level) is a small part of the current global economy and hence the "Peak energy" will shrink the "Financial assets" economy running on Cheap oil while the "Real economy will continue to run and maybe expand at 3% level..

Service industry is a dying industry.. as demand will remain for the basic necessities .. future is bright in "Food industry", "Renewable Energy" and "Public transportation" 

Stocks in general are a loosing proposition..(due to peak energy making most of the economic activities un-economical)  one has to be stock specific .. I have locked in on "Jayant Agro, GAEL, NHPC and Tata Comm" find your gems.. and focus. 

GAEL: Alert!! Gujarat Ambuja Exports June 2012 Results

Gujarat Ambuja Exports results are out.

Particulars	Quarter Ended
�	Jun. 2012	Jun. 2011	% Var.
Sales	553.50	367.31	51
OPM %	8.70	8.30	5
PBDT	43.09	27.62	56
PBT	34.93	20.07	74
NP	26.71	15.22	75

So we could expect Net Profit for full year ended 2013 to be 100Cr .. expect the stock to jump on monday July 23,2012

Jayant Agro: Castor oil Shoes by Nike!!

In the name of environmental concern Nike!! is also making shoes with Castor oil derivatives.. 

unfortunately nobody publishes the real reason.. new EU Regulations (REACH) which would force companies to label their products as carcinogenic or can cause birth defects.. 

Good news for investors in Jayant agro Organics the largest castor seed processing company in India. 

Here is the news for all..

==============

Nike Introduces Sneakers Made Of Beans & Recycled Bottles

The iconic sports brand successfully creates a football shoe that built with sustainability and speed in mind.

Nike has launched the Nike GS in London, a football cleat the company is heralding as the ‘lightest, fastest, most environmentally-friendly production boot the company has ever made.’ The lightweight shoe weighs in at a mere 160 grams and features recycled and renewable materials throughout its body.

The laces, lining and tongue of the shoe are made from a minimum of 70% reused plastics, including recycled water bottles and polyester, and the traction-plate on the shoes is made from 50% renewable Pebax® Renu, a plant-based material composed of 97% castor beans. The result is a shoe that is lighter and stronger for the athlete, and more sustainable for the environment- using the castor beans makes the shoe 15% lighter than traditional cleats while the beans also require much less water to grow than other natural materials. The Nike GS are also chemical free, and the Kangaroo leather in the shoes are made with 35% less carbon emissions than traditional material. Andy Caine, global design director for Nike Football, says of the Nike GS:

The Nike GS is the lightest and fastest football boot we’ve ever made and really defines a new era in how we create, design and produce elite football boots. When you can deliver a boot that combines high end performance and a low environmental footprint that’s a winning proposition for players and planet.

Only 2012 Nike GS shoes were made; they will be available for purchase through Nike.com and selected online retailers for 300 USD beginning August 15th.Nike GS

Link to original article: (Link)

Song: Johnny cash: One piece at a time and it would'nt cost me a dime

I was working with GM in Detroit .. though nowhere close to an assembly plant for Cadillac.. 

GM cars (higher end) are really good cars .. unlike the image in the mind of Indians in US...

I like this song.. (long before I went to US.. never though I would be working for GM.. made a bunch buying GM Bonds when GM was reorganized in 2009 (Link) )

Well, I left Kentucky back in '49

An' went to Detroit workin' on a 'sembly line

The first year they had me puttin' wheels on cadillacs

Every day I'd watch them beauties roll by

And sometimes I'd hang my head and cry

'Cause I always wanted me one that was long and black.

One day I devised myself a plan

That should be the envy of most any man

I'd sneak it out of there in a lunchbox in my hand

Now gettin' caught meant gettin' fired

But I figured I'd have it all by the time I retired

I'd have me a car worth at least a hundred grand.

[CHORUS]

I'd get it one piece at a time

And it wouldn't cost me a dime

You'll know it's me when I come through your town

I'm gonna ride around in style

I'm gonna drive everybody wild

'Cause I'll have the only one there is a round.

So the very next day when I punched in

With my big lunchbox and with help from my friends

I left that day with a lunch box full of gears

Now, I never considered myself a thief

GM wouldn't miss just one little piece

Especially if I strung it out over several years.

The first day I got me a fuel pump

And the next day I got me an engine and a trunk

Then I got me a transmission and all of the chrome

The little things I could get in my big lunchbox

Like nuts, an' bolts, and all four shocks

But the big stuff we snuck out in my buddy's mobile home.

Now, up to now my plan went all right

'Til we tried to put it all together one night

And that's when we noticed that something was definitely wrong.

The transmission was a '53

And the motor turned out to be a '73

And when we tried to put in the bolts all the holes were gone.

So we drilled it out so that it would fit

And with a little bit of help with an A-daptor kit

We had that engine runnin' just like a song

Now the headlight' was another sight

We had two on the left and one on the right

But when we pulled out the switch all three of 'em come on.

The back end looked kinda funny too

But we put it together and when we got thru

Well, that's when we noticed that we only had one tail-fin

About that time my wife walked out

And I could see in her eyes that she had her doubts

But she opened the door and said "Honey, take me for a spin."

So we drove up town just to get the tags

And I headed her right on down main drag

I could hear everybody laughin' for blocks around

But up there at the court house they didn't laugh

'Cause to type it up it took the whole staff

And when they got through the title weighed sixty pounds.

[CHORUS]

I got it one piece at a time

And it didn't cost me a dime

You'll know it's me when I come through your town

I'm gonna ride around in style

I'm gonna drive everybody wild

'Cause I'll have the only one there is around.

[Spoken] Ugh! Yow, RED RYDER 

This is the COTTON MOUTH

In the PSYCHO-BILLY CADILLAC Come on

Huh, This is the COTTON MOUTH

And negatory on the cost of this mow-chine there RED RYDER

You might say I went right up to the factory

And picked it up, it's cheaper that way

Ugh!, what model is it? 

Well, it's a fortynine, fifty, fifty one, fifty two, fifty three, fifty four, fifty five, fifty six, fifty seven, fifty eight, fifty nine automobile! It's a sixty, sixty one, sixty two, sixty three, sixty four, sixty five, sixty six, sixty seven, sixty eight, sixty nine, seventy automobile

Jayant Agro: June DGFT Export numbers

Director General of Foreign Trade has published Export data for Month of June 2012 

as per DGFT data Jayant has Export FOB (Free On Board)for June 2012 at 157.9Cr 

You can get the info at DGFT Website (Link)

License no info for Jayant is available here (Link)

IEC Code for Jayant is: IEC: 0393002047

Here is the processed data (June 2012) for every one..

April 2012 FOB Data was: 242.07Cr (Link)

May 2012 FOB Data is: 187.59Cr(Link)

June 2012 FOB Data is 157.9Cr

So Q1 2013 ie quarter ending June 2012  = 242.07 + 187.59+157.9 = 587.56Cr

Another observation is that higher value Derivatives exports are forming a larger part of Jayant's exports.. Derivatives are higher value exports where the FOB/CIF is around 50 while castor oil & 1st Generation derivatives have a FOB/CIF ratio of 20-30 which is good news for investors in Jayant Agro.

PN: Please Note this is the expected sales numbers to be reported by Jayant Agro based on publicly available information. There is also a possibility that there is misinterpretation of data... Please do your own deep dive before investing

Jayant Agro Organics: May 2012-CIF,FOB Data

Director General of Foreign Trade has published Export data for Month of May 2012 

as per DGFT data Jayant has Export FOB (Free On Board)for May 2012 at 187.59Cr 

You can get the info at DGFT Website (Link)

License no info for Jayant is available here (Link)

IEC Code for Jayant is: IEC: 0393002047

Here is the processed data (May 2012) for every one..

April 2012 FOB Data was: 242.07Cr (Link)

May 2012 FOB Data is: 187.59Cr

PN: This is publicly available information on the internet and there is a possibility of misinterpretation and misrepresentation.. Please do your own deep dive before investing.

Jayant Agro: Swastika Investmart recommends with target price 217.60

Swastika Investmart has recommended a buy on Jayant Agro Organics with starting price as 128 and target price of 217.60 , Duration 9-12 months, Expected return 70%

Pls note standlone results have been considered .. while we generally review consolidated data..

Link to original document (Link) 

=happy investing

Jayant Agro Organics: Star Trading House, April 2012 FOB Data

According to Director General of Foreign Trade.. Jayant Agro Organics is status holder as "Star Trading House" valid till 2017

Link to original Document: (Link)

A Star Trading House category needs exports of 2500Cr FOB value in current + 3 yrs ie past 4 yrs (Taken together) which translates to about 625Cr each year.. 

We need to look when Jayant enters into Premier Trading house category 1,875Cr exports every year for past 4 yrs..Jayant should reach that in next 3 yrs as we have already crossed 1770Cr in March 2012..

Link to Original Document: (Link)

Jayant Agro Organics has the IEC Code: 0393002047

Now last time the concern was what is the FOB value of exports.. we had the license numbers and  CIF Value.. The DGFT website has the provision where you can enter the License Number and the IEC Code and you can get the FOB Value of the export. 

We already have the facility for determining the License number for Jayant Agro

VKUY and FPS April 2012 (Link)

DEPB April 2012 (Link)

So we can use Jayant Agro Organics  IEC Code (0393002047) and License Number from the above links and get the FOB Value at this Link

So now we can get the FOB value which should translate to sales numbers reported by Jayant 

Now just to get everyone up and running I have collated the FOB data for April 2012 for Jayant Agro Organics here it is.. (You can validate by following the process mentioned above in red)

So as per the DGFT Export license issued in April 2012 Jayant has FOB export sales of 242.07Cr in April 2012..

  PN: As per my communication with Jayant management (for Jan-March 2012 Sales figures) there is a misinterpretation by me of the License and FOB Data issued by DGFT.. (for Jan-March 2012) (comments section of previous post link)

Last post we had discussed about a google search to find the license data.. well DGFT has provided a link where you can get the license data.. (Link)

VKUY and FPS data is under: (Duty Credit Script Link)

DEPB is under DEPB Link)

So no need to google search just go to DEPB website and get the latest data..

PN: These are my personal views/interpretation about publicly available information... please do your own deep dive before investing.

Jayant Agro Organics: Peek into the future..

Q1 results are nothing but sales and profit for the months of 
April-May June which is reported in "July"

Director General of Foreign Trade (DGFT) publishes India's 
export data every month.. so by July we can get our hands into 
the dgft export numbers for Jayant agro in month of April, May 
and June giving us a fair idea of what the sales number will look 
like in Q1 report in July..

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
If you want to find the dgft export numbers for Jayant for a month 
in the past you need to search in google with the keywords 
"Licences issued for Category dgft (month) (year) Jayant agro Organics"
Search for Month: Jan year: 2012 will be
=========================
Licences issued for category dgft Jan 2012 Jayant Agro Organics
=========================
The search we are looking for is under the heading "Licences issued for Category"

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
There are 3 sections under which Jayant Agro Organics reports 
export data..
- Vishesh Krishi Upaj Yojana
- Focus Product Scheme
- DEPB Post Export
Focus Product Scheme and Vishesh Krishi Upaj Yojana are
 in one link while DEPB Post Export is a separate link..


So for each month's export data we need to collate data from two 
links provided by DGFT
For the month of Jan 2012 the two links are:-
Vishesh Krishi Upaj Yojana & Focus Product Scheme (Link)
DEPB Export (Link)
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
The reported data is CIF (Cost of Insurance & Freight) ..
 it does not disclose the actual value of export which 
is reported as FOB (Freight on Board)

Luckily I did get my hands on FOB Data from dgft which was 
available to public for Feb and March 2012 and compared 
CIF and FOB ratio.. According to me..for Jayant 
FOB is approximately 30 times CIF for Vishesh Krishi Upaj Yojana
FOB is approximately 50 times CIF for Focus Product Scheme
FOB is approximately 30 times CIF for DEPB Export 
(I did not have the FOB data for DEPB Export .. its my 
own assumption)


Right now you can peek into Jayant Agro's  CIF data for April 
2012 just Google search for:-
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
Licences issued for category dgft April 2012 Jayant Agro Organics
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
remember there are two links from which you need to collate 
the data..


PN: I did speak to the management about the data being published
 by DGFT and my interpretation of sales numbers..
Jayant Agro management's understanding was that I had drawn 
wrong conclusions and hence my estimated sales numbers for 
Jayant are due to mis-interpretation of DGFT data... 


So please understand any information you conclude from DGFT 
data is your own interpretation.. and quite possibly wrong.. Its a 
Peek into the future but not necessarily a true complete picture..


I am long Jayant Agro Organics..


=happy investing

Gujarat Ambuja Exports: March 2012 Year End Result Review

Gujarat Ambuja Exports reported its year ending March 2012 results on May 21,2012.

1. Year on Year..

- Sales have increased by 8.92%

- Expenditure has increased by 11.77% (Includes Forex loss of 4.34Cr for full year.. Q4 there was a forex profit of 11.23Cr)

- Profit Before Depreciation Interest and Taxes has decreased by 56.65% (Margins have contracted from 7.42% (2011) to 5% (2012) as percentage of sales)

- Interest expenses increased by 66.50%

- Taxes reduced by 56.78%

- Net profit was down 47.18% (PBDIT was down 56.65% and net profit was down only 47.18% so there is a 9.47% +ve difference between PBDIT and Net Profit)

2.  PBDIT Margins have contracted as percentage of sales from 7.42% (2011) to 5% (2012) this is a cause of concern..

- though interest payments have increased by 66.50% (Y-Y) as percentage of sales.. interest payments are less than 1% which is still manageable and due to the managements clear intentions to maintain Zero long term debt levels..

I must add that GAEL is an agro processing major which procures raw material during harvest season when its cheapest.. and then the agro products are further processed during the year. Short term loans are taken from banks during the harvest season and paid backin the next 6-12 months.. Interest rate hike by RBI has impacted GAEL by increasing its interest costs by 66.50% (Y-Y)

3 GAEL has 4 divisions. - cotton yarn, - maize processing, - agro processing, - Windmill

- Cotton yarn division seems to be the culprit.. reporting -26.02cr Net profit(+11.29cr 2011) .. which means cotton yarn division itself has a profit impact of 26.02 + 11.29 = 37.31cr. (Y-o-Y)

- Maize processing division also has had a sharp fall in profits as well as profit margins..

Profit margins:- 12.57% (2011:-20.22%)

Profit impact on 2012 profits is 25.81Cr (Y-o-Y)

The uttarakhand maize processing plant had a tax free period which could have come to an end and hence we are seeing profit margins contract.. so going forward the maize processing division profit margins might remain around 12.57% is my understanding. 

Karnataka plant might get tax breaks.. which could help in increasing margins once again. (Lets hope)

- Agro Processing division has seen its profit margins expand.to 4.24% (March 2011:-3.65%) this had a positive impact on net profit of 12.85Cr (Y-o-Y)

- Wind mill division  has a small but consistent contribution of 4.46Cr.

Current Assets:- 609.38Cr (528.11Cr-2011)

Current Liabilities:- 531.51Cr (431.26Cr-2011)

Net Current Assets:=>>> Current Assets - Current Liabilities =  77.87Cr (96.85Cr-2011)

A drop in "Net Current Assets" indicates that the management has been active in improving capital efficiency by holding back lenders (Increasing Liabilities) and reducing advance payments to creditors (Decreasing Current Assets)

Net Current Assets:- 77.87Cr (96.87Cr-2011) indicates a reduction in working capital requirement even as sales have increased or remained consistent... a big positive.

Conclusion:- GAEL has reported a drop in profits of 47.18% even as sales have remained constant. a dig down indicates.. drop in profits due to Cotton yarn division and margin decrease in maize processing division.. Maize processing division margin drop could be permanent as uttarakhand maize division was enjoying tax incentives which are set to expire(my opinion)...  

Net Current Assets have reduced which indicates the management is in control and taking steps to improve the health of the company.. 

GAEL is doing just fine and accumulating wealth for its investors.. but one must remember the global investment climate is turning out to be long term negative.. my personal opinion is further expansion plans should only be done after careful review.. its best to accumulate financial assets (cash) as some "not so well managed" company assets might be available cheap for taking..

Jayant Agro : Results Quarter and Year ending March 2012

Jayant Agro Organics
CMP: 119
Market Cap: 178.50Cr


Jayant Agro Year ending March 2012 results are out. lets look at the standalone numbers which are reported in the press..

The results at standalone level is picture perfect. 
Sales (topline) up by 45.17% and Net Profit (Bottomline) up by 52.76% indicating profit margin expansion.

3 year standalone numbers are even more impressive..

March 2010 Sales: 880.33Cr Net Profit: 7.84Cr

March 2011 Sales: 1,148.07Cr Net Profit: 17.74Cr

March 2012 Sales: 1,666.69Cr  Net Profit: 27.10Cr

In 3 yrs sales have doubled while net profits have more than tripple'd !! 

Consolidated Results:-

As mentioned before the numbers that we need to look at is consolidated results because of materially significant subsidiaries of Jayant Agro Organics namely Ihsedu Agro Chem and Ihsedu Specialty Chemicals (Ihsedu Specialities Chemicals is now awaiting merger approval from high court with Jayant Agro Organics)

3 yrs Consolidated Results for Jayant Agro.

1. At the consolidated level year on year sales growth is 51.30% which is great but net profit growth at 12.09% leaves a lot to be desired. the top two y-y highest percentage change are Interest (65.26%) and Taxes (59.01%) 

2. Interest payments: My understanding was that govt was giving a 2% interest rate subsidy to motivate exporters... hence exporters are reporting interest expense to claim that subsidy. 

Interest rate payments at 2.26% of  sales for year end March 2012 seems to be just that.. though a little on the higher side.. needs to be watched closely in the future..

2. Tax payments: Tax payments are up 59% (y-y) while net profit is up just 12% completely baffles me..

One of the many reason's companies are incorporated is because they are effective in reducing the tax paid to govt. 

Increase in tax paid :- 16.91cr (2012) - 10.63cr (2011) = 6.27cr

Increase in net profit :- 27.54cr (2012) - 24.57cr (2011) = 2.97cr

Surely taxes paid in 2012 is on the higher side and net profit is on the lower side.. 

Corporate Income tax rate in India is 33.2% so lets try to calculate the hypothetical PBT and hence Net profit for tax paid of 16.91Cr ..

Tax Paid 16.91Cr 

Effective tax rate 33.2%

PBT: 51.24Cr

Net Profit: 51.24 - 16.91Cr = 34.33Cr

P.N: this is a hypothetical calculation for our own understanding.

Here is another interesting piece of info.. effective taxe rate for Jayant past 3 yrs

2012: Tax paid: 16.91Cr Net Profit: 27.54 PBT: 44.46Cr Effective tax rate: 38% 

2011: Tax paid: 10.63Cr Net Profit: 24.57Cr PBT: 35.21Cr Effective tax rate: 30%

2010: Tax paid: 10.64Cr Net Profit: 12.46Cr PBT: 23.10Cr Effective tax rate: 46%

Jayant it seems has a habit of paying higher taxes.. infact in 2010 and 2011 tax paid is 10.64Cr while net profit is 12.46Cr(2010) and 24.57Cr(2011) 

Conclusion: Jayant year end March 2012 numbers though "impressive"  at standalone levels is just "fair" at consolidated levels mainly because of low rate of net profit growth.. digging a little deeper the taxes paid are very high and seems to give an idea that profits are being watered down.. looking at the last 3 yrs data we can see that Jayant management seems to be conservative in reporting net profit figures and taxes paid 3yrs avg is higher than the 33.2% corporate income tax rate set by govt of India. 

My personal opinion is for the year ended March 2012 at gross level (PBDIT) profit margins are stable  ..which could imply ...Interest rates are over stated and maybe depreciation also .. this has effectively reduced the net profit figures.. and skewed the results to such an extent that tax increase is 6.27cr while profit increase is just 2.97cr..  I would say jayant could have ideally reported march 2012 net profit of 34.33cr 

PN: these are my personal views/interpretation based on publicly available data.. Pls do your own deep dive before investing.

Jayant Agro Blog Archive

    

5000 Tonnes of castor seed sold by Acazis AG

Gilching, Germany, Mar 19, 2012 (Thomson Reuters ONE via COMTEX) -- Acazis AG / ACAZIS AG signs its first CONTRACT for sale of 5000 tons of castor beans and appoints SINOETH Hong Kong International Group Limited as exclusive distributor for China, Japan, Korea, Ethiopia. . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

Gilching, Munich, 19 March 2012 - Acazis AG based in Gilching, Munich signed a 5 year agreement with Sinoeth Hong-Kong International Group Limited on 15 March 2012. The agreement foresees the marketing and sale of all or part of Acazis AG's castor harvest. It will be renewed for a further five years should neither party decide to terminate the contract.

Sinoeth Hong Kong has committed to purchasing from Acazis AG, a minimum of 1000 tons of castor beans annually. The purchase price of the castor beans is based on the official prices indicated by the Indian Commodity Futures Exchange NCDEX (www.ncdex.com/MarketData/SpotPrice.aspx ) in India. At present the SPOT price for one ton of castor beans corresponds to approximately USD 720, -.

Sinoeth Hong Kong has excellent commercial contacts in both in Asia and beyond. Some of the companies with which Sinoeth Hong Kong currently collaborates include the following:

SDIC International Trade Co. Ltd.,

China National Light Industrial Products Imp. & Exp, Corporation,

China Star Int. Trade Co. Ltd.,

SinoTruk (Hongkong) Ltd.

Sandong Wuzheng Co. Ltd,

Quingdao Doublestar Tire Co. Ltd.,

Changzhou Dongfeng Agriultural Machinery Group Co. Ltd. and

JiangSu Sevencontinent Green Chemical Co. Ltd.

The terms and conditions agreed with Sinoeth Hong Kong already include the purchase of a minimum of 1000 tons of castor beans in 2012. Acazis has guaranteed delivery of the castor crop in two instalments - September and December of this year.

Patrick Bigger, CEO of Acazis AG, has expressed great pleasure in the company's partnership with Sinoeth Hong Kong. He states; "The signing of such a long-term contract with Sinoeth Hong Kong has opened the market for Acazis AG in the sale of castor in the Asian and, in particular, the large Chinese castor market. The conditions relating to a minimum annual purchase provide us with greater operational planning guarantees whilst at the same time minimising the risks for Acazis AG.

We are convinced that we have found in Hong Kong Sinoeth an experienced and very well-connected trading partner which will facilitate access to the world's most important castor importers. With this in mind, we very much look forward to both a fruitful and long-term cooperation."

Jason Xie, CEO of Sinoeth Hong Kong adds; "The contract signed with Acazis AG means that we have acquired one of the major producers of castor oil in the future for our customers in China and Asia. The long-term contract term of 5 years which will be automatically extended for a further 5 years after expiration, will greatly help us to consolidate and increase trade relations with our customers. China is one of the largest importers of castor beans and we are convinced that the quality of the harvest and the significant potential of the 50,000 hectare castor crop means important benefits for our company".

About the company

Acazis AG (Acazis) based in Gilching near Munich, operates in the cultivation and use of castor plants, the production of edible oils, the provision of any related services and the acquisition and management of companies and shareholding in related companies as well as the as the carrying out of Executive Board functions.

Link to the source

Conclusion: 50,000 hectares of castor production is a lot.. if they can get the same yield. In India the yield varies from 500kg/hectare to 1700kg/hectare. The fact is that people see the potential and castor plantations are coming up in Africa, South America, Mexico.. as the saying goes .. more the merrier. Looking forward to Jayant Agro Organics producing higher value added castor derivatives .. maybe India can start import castor seeds!!

Jayant Agro Organics Archives

Castor oil Loan Scam 1100Cr detected by Central Vigilance comission

The Central Vigilance Commission has unearthed a large scale fraud committed by a private firm by allegedly misusing Rs 1,100 crore loan taken from different nationalised banks and wrongly claiming its end-use.
CVC officials said the firm was taking loans from various banks with the stipulations that it will be used by farmers of different states for growing and supplying castor seeds.

During  a detailed scrutiny, the Chief Vigilance Officer of Bank of Maharashtra noticed irregularity and found that the firm has perpetrated an alleged fraud of Rs 50 crore. "The matter was brought to the notice of other banks and the Commission which found that the total amount involved in the whole case is Rs 1,100 crore," a CVC official said. He said that a consortium of nine banks have lent to the firm.

"The loan amount has been siphoned off through Village Level Aggregators appointed by the company. The account has become Non-Performing Asset and has been declared as fraud,"  the official said refusing to divulge further information. The Commission advised the banks to ensure that staff accountability be fixed in the case and has asked them to get the case registered with CBI. "The CBI has been directed to register
the case and investigate the matter," he said.An email query on the matter sent to Bank of Maharashtra and other banks did not yield any response.

"It is a serious fraud. The firm has wrongly claimed that the loan amount was being used by the farmers. We are awaiting CBI's preliminary enquiry report on the matter," the official added

Conclusion: This is not good news.. There were no names mentioned but considering the size of Jayant Agro in the castor business it is a cause for concern. hopefully the whole of udeshi family is involved in day to day running of Jayant Agro and will be able to prevent this scam from impacting Jayant Agro. News has been reported in major news papers in April 22,2012 onwards.


Link to news Item: Link1 , Link 2

Jayant Agro: Castor Crop Survey-SEA & Jayant estimated earnings Year 2011-12

Looks like there has been a huge increase in cultivation of Castor in India. As per Solvent Extractors Association (SEA) of India.

=   Total area under Castor crop in India for the year 2011-12 is 11.50 lakh hectares. It has increased by 34% as compared to previous year.

=    Estimated total production of Castor Seeds in India for the year 2011-12 is 16.19 lakh tonnes.  It has increased by 30% as compared to previous year.

=    Average yield for the year 2011-12 is 1417 kg/hectare as against 1453 kg/hectare during the year 2010-11.  It has decreased by 3% as compared to previous year.

Export numbers have also increased by 60% .. so we can expect Jayant also to report higher earnings for the year ended March 31,2012.

Jayant has reported for 9 months ended dec2011.(Year on Year)Sales increase: 62%  PBDIT Profit margin of 5.05%Net Profit margin of 1.83%

Assuming Jayant Agro maintains the same profit margins as reported for 9 months ended Dec 2011we can expect Jayant Agro Expected year ending March 2012:-Sales:1,875.20crPBDIT: 94.69crNet Profit: 34.31cr EPS: 22.87

Please Note for year ending March 2011 Profit margins were

PBDIT : 5.41%

Net Profit: 2.10%

Assuming Jayant maintains the same margin as march 2011..(higher than margins for 9 months ended dec 2011) these margins would result in :- 

- PBDIT:  101.44cr

- Net Profit: 39.37cr

- EPS: 26.25

Now we all know that Sebacic acid derivatives plant has started production from dec 2011 so we can expect margins to improve for 3 months data..

My guess estimate for Year ending March 2012 Net Profit numbers:

Poor Result would be below 31Cr EPS: 20.66

Fair result would be: 34.31cr EPS: 22.87

Great result would be: 39cr,  EPS: 26 or above

A     whatever the result .. we can expect the dividend payout to increase based on historical figures..  

        dividend payout as percentage of net profit (Including dividend tax):

          March 2011: 13.40%

          March 2010: 23.33%

          March 2009: 36.18%

          March 2008: 25.65%

   

          So even assuming 5 yrs avg of 19.71% and assuming worst case result of 31Cr Net Profit: Dividend payout will be rs 4.07 per share assuming 34-39cr as net profit dividend payout could be: 4.46 - 5.12 assuming 13.4% for net profit of 31cr we can expect dividend of 2.76 (Poor payout) 

C

           Conclusion: Jayant is a strong value buy! For year ending March 2012 we can expect Jayant Agro to report:

            Topline of 1875cr 

            Net Profit from 30cr to 39cr, 

            EPS of 20-26 per share and 

            Dividend payout from Rs 2.76 to 5.12 per share (before dividend tax)

 

       PN: this is my personal view based on publicly available information. please do your own deep dive before investing