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Friday, August 22, 2008

Khoday India:-You are dumped again

Scripscan:Khoday India
CMP Rs 150
Target: Rs 480

Research house views:Growth in domestic spirits segment & increasing social acceptability of alcoholic beverages expected to be a major driver:IMFL (Indian-made foreign liquor) industry is poised to grow at 15% CAGR over 2007-10. The total market for spirits (alternatively referred to as IMFL) in India for the year 2007 was estimated at Rs. 931,367 million.The market grew at 12.5-13% between year 2001 & 2007. In volume terms, the spirits market was estimated at approx. 3.7 billion litres for FY '07(excluding beer & country liqour segments).The share of Whisky & Rum in the overall spirits market in India were approx. 30% and 4% respectively for the year 2007. Whisky & Rum together contribute about 70-75% of the total revenue for Khoday India Ltd.Khoday India as a strong reputation all over India for the quality of its brands in the premium & super premium segments (Peter Scot, Red Knight, Peter Scot deluxe, Red Knight deluxe, Hercules Bianco Rum, Hercules deluxe Rum).These brands are expected to contribute a major chunk of the growth in the company's overall net sales from Rs. 1333.3 million in FY '07 to Rs. 1763.4 million in FY '08 and Rs.3990.5 million in FY '09.The bottom-line (Profits after Tax) of the company is estimated to grow from Rs.115.7 million in FY '07 to Rs.174.2 million in FY '08 and Rs.671.0 million in FY '09.The company expects to achieve the short-term target of 1.2 million cases per annum by the year FY '08 from the current 0.9 million cases (one case ~ 9 litres). This is expected to translate into huge margins as a major portion of the volumes growth would be from its premium brands.For FY '08 & FY '09, the PBDIT margins from business are estimated to be 23% & 27%, respectively. Further, the company is also exploring acquisition of global premium brands, thus spurring inorganic growth and in the process has already acquired stake in a steel detailing company in USA.Real estate development plans expected to add to both top-line & bottom-line of the company:Khoday India aggressively plans to foray into real estate development. The company is in advanced stages of acquiring 23 acres of land in the electronic city of Bangalore. Further, the company is in the process of tying up with an overseas-based architect for construction of commercial complexes on the acquired land.The construction activities are expected to begin by June 2008. Negotiations are in process for pre-sale of the proposed construction.

My view:These is the report of a bombay based research house suggesting its clients to buy shares of khoday india.With the kind of financial performance this company has produced in Q4, 2008 it has shown a total inability of Giridhar Khoday to effectively manage the input cost increases for this very old Whisky and Rum maker from the South.However, with a profit of a mere Rs 7.9 crore on a turnover of Rs 200 crore for FY08, and a Q4 profit of Rs 50 lakh on a turnover of Rs 50 crore, this concern seems more like a Drunken Duck, and the stock needs to fall to as much as Rs 40 where it has been for the last 20 years.This is another istance for sure where a "complete biased" view has been published may be for sake of some "unscuplous activities" which you can certainly think of guys.The scrip at present is quoting at just 80rs vs the recomended price of 150 and its recent jan high of 380.

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