ANDREW YULE & COMPANY LIMITED
DATE: 23/12/2017
  • COMPANY NAME : ANDREW YULE & COMPANY LIMITED
  • Description :

    Recommendation - Buy

    Hold for 2 years

    Target: 70 Rs.

     

    • CMP: 37 Rs
    • BSE Code: 526173
    • Market Capital: 1770 Cr.
    • Face Value: 2
    • 52 Week Low / High: 20.35/40.9
    • Book Value: 6.7
    • Price/Book Value: 5.34
    • Promoter Share Pledge – Nil
    • TTM EPS – 1.96
    • P/E – 24
    • Dividend (%) – 5%

     

    Part 1 Company’s Information:

    • Andrew Yule & Company Ltd was incorporated in the year 1919 as a private limited company and after that become public limited in 1948.
    • Andrew Yule & Company Ltd is a medium-large Indian manufacturing and industrial conglomerate, approximately 97.5% owned by the Indian Government.
    • Andrew Yule & Company Limited is engaged in tea, electrical and engineering business.
    • The Company operates through four segments: Engineering, Electrical, Tea and Printing.

    The Engineering segment: offers industrial fans; air pollution and water pollution control equipment, and turnkey projects.

    The Electrical segment: includes high tension (HT) and low tension (LT) switchgear, transformers, relay and contactors, and turnkey projects on power distribution.

    The Tea segment: is engaged in tea growing and manufacturing.

    The Printing segment: is involved in printing of books, periodicals and publicity materials. Its Switchgear & Breantford Unit is located at Kolkata Transformer & Switchgear Unit at Chennai.

    • The Company has approximately five tea estates in West Bengal, including Mim Tea Estate at Darjeeling, and Karbala, Banarhat, Choonabhutti and New Dooars tea estates at Dooars, and over 10 tea estates in Assam, including Khowang, Bhamun, Hoolungoorie, Murphulani and Bogijan tea estates.

     

    Part – 2 Andrew Yule & Company Limited- Subsidiary

    • The Company has three wholly owned subsidiaries as on 31st March, 2017.

    Hooghly Printing Co. Ltd

    Yule Engineering Ltd. and

    Yule Electrical Ltd

     

    Part – 3 Andrew Yule & Company Limited – Manufacturing Facility plus Products

    • Engineering Division 

    Industrial Fans & Blowers, Air Pollution Control Equipment, Water Treatment Plants, Tea Processing machinery, Engineering Turnkey Contracts.

    Location : Kalyani, West Bengal

    • Electrical Division  

    Power & Distribution Transformers, HT Switchgears & LT Control Gears, Flame Proof Switchgears, Voltage Regulators & Rectifiers, Plant Communication, Fire Alarm & Detection System.

    Location : Switchgear & Breantford Unit at Kolkata Transformer & Switchgear Unit at Chennai.

    • Tea Division

    Bulk Tea (CTC & Orthodox). Location : West Bengal (5 Tea Estates) : Mim Tea Estate at Darjeeling, Karbala,Banarhat, Choonabhutti and New Dooars Tea Estates at Dooars. Assam (10 Tea Estates) : Khowang, Bhamun, Hingrijan, Basmatia,Desam, Tinkong, Rajgarh, Hoolungoorie, Murphulani and Bogijan Tea Estates.

     

    Part – 4 Andrew Yule & Company Limited - Dividend History

     

    Andrew Yule - Dividend Declared

    Announcement

    Effective

    Dividend

    Dividend

    Remarks

    Date

    Date

    Type

    (%)

    31/05/2017

    08/09/2017

    Final

    5

    Rs.0.1000 per share(5%)Final Dividend

    01/06/2015

    21/07/2015

    Final

    5

    Rs.0.1000 per share(5%)Dividend

    27/07/2002

    12/09/2002

    Final

    0

    AGM & Nil Dividend

    02/08/2001

    03/09/2001

    Final

    0

    Nil Dividend

     

    Part – 5 Andrew Yule & Company Limited - Shareholding Pattern:

     

    Part – 6 Financial Focus:

    Focus on - Financial Results March 2017:

    • During the year, the turnover of the Company has grown to Rs. 407.62 Cr, as compared to Rs. 368.03 Cr for FY 2015-16 resulting in growth of 10.75%.
    • PBDT for the year was 40.72 Cr as against Rs 15.95 Cr for 2015-16 an increase of 155.3%
    • Stand lone Profit after Tax for the year was Rs. 27.39 Cr as against 8.35 Cr for 2015-16 an increase of 228%.

    Segment Wise Performance:

    • Tea division:

    Turnover of Tea division of the company was 205.81 crores during the year. Tea exports during the year were 0.82 lakh kgs with FOB 1.78 crores, catering to markets in Georgia, USA, Germany, Australia and Canada. PBT increased from 14.77 crores last year to 31.39 crores this year. Own Crop increased from 100.72 lakh kgs last year to 102.34 lakh kgs this year. With Company’s focus on quality of the produce and continuous investments in uprooting and replanting and thereby assuring increased yield, the outlook of Tea division is encouraging.

    • Electrical Division (Kolkata Operation):

    Highest turnover of `90 crore in the history of the Division achieved due to various initiatives taken by the Management of the Company.

    50% growth in Net Sales 90 crore compared to 61 crore in 2015-16.

    63% growth in sale of Distribution Transformer from 42 crore (2015-16) to 68 crore (2016-17).

    • Electrical Division (Chennai Operation):

    Achieved Highest Turnover of `66.90 crore during the year 2016-17 compared to last year’s Turnover of `56.43 crore.

    Achieved Highest Order Booking for 2016-17 `83.55 crore compared to last year 2015-16 Order booking of `70.73 crore.

    • Engineering Division:

    Net Sales was 30.80 crore (+28% YOY).

    Capacity utilization also reached all Time High, as number of Impellers, produced in-house stands at 309 (+1.3% YOY).

     

    Focus on - Financial Results September quarter 2017:

    • For the quarter ended 30-09-2017, the company has reported a Standalone sales of Rs 94.67 Crore, up 49.74 % from last quarter Sales of Rs 63.22 Crore and down -25.29 % from last year same quarter Sales of Rs 126.71

     

    Part – 7 Opportunities & Threats:

    [A] OPPORTUNITIES

    Tea Division:

    1. Increasing younger age profile of the tea bushes (through vigorous uprooting & replanting programme each year) leading to higher crop prospects for years to come.
    2. 320 hectares of fallow land to be planted, yielding guaranteed growth over the next decade.
    3. Orthodox tea manufacturing facilities in some Tea Estates in Assam which fetches higher prices / margins, as compared to CTC teas.
    4. Green Tea and Organic Tea manufacture in West Bengal, for further value addition.
    5. Market penetration of packaged (instant, flavored, green, specialty) and organic teas.
    6. Certification (viz. FSSAI, Trustea, Rainforest Alliance, UTZ, ISO 9001 & 22000, HACCP etc.) for recognition and export stipulations.
    7. New Export opportunities in Iran, Germany, USA, Australia & Canada and domestic e-commerce outlets.
    8. With better field practices and major emphasis on Crop as well as Quality, the Division will continue maintaining its profitability in the near future.

    Electrical and Engineering Division:

    1. In view of the huge investment by GOI in T+D Sector, Company have already initiated steps for foray into substation project work (132kV Class and above). Apart from addition to topline growth it will also serve as an outlet for in house equipment like Power and Distribution Transformers as well as VCBs.
    2. There is potential interest of market participants to develop and invest in the electricity market.
    3. There is potential for reasonable increase in the usage of renewable energy sources.
    4. There is an increase in the inflow of foreign direct investment into the domestic market.

     

    [B] THREATS

    Tea Division:

    1. Unprecedented hike in wage, pest management, power and other input costs threatens to bring down margin of profit drastically.
    2. Exodus of labour resulting in shortage of workers during peak cropping months.
    3. Being primarily in Bulk tea business and sales through Auction, prices are market driven and not in the hands of the producer.
    4. Industry is dependent on weather conditions. Adverse weather conditions especially in Dooars can dramatically change the bottom line.
    5. Agitations/closures also effects division’s profitability.

    Electrical and Engineering Division:

    1. With steel price (major raw material) hike by 30% between July, 2016 to January, 2017, the rise of value erosion increased as the user industry is not willing to absorb the price shock. This increases concern for future business and pricing model as some competitors may use inferior grade material, thereby undercut the price to increase their market share.
    2. Products getting outpriced due to intense price war.

     

    Investment Rational:

    1. Continuous reduction in Debt
    2. 5 Year ROE > 20%
    3. Compounded Profit Growth > 20%
    4. High demand of green tea and the tea division continues to grow from strength to strength through its special emphasis on “Quality” of its produce and is now recognized as one of the “Top Quality Tea Producer” in the industry.
    5. The rapid development of industrial infrastructure and expansion witnessed in the construction sector, primarily in the emerging markets, are fueling demand for low voltage (LV) and medium voltage (MV) switchgear. With governments proactively investing in urbanization and rural development, renewal of existing transmission and distribution networks is on the cards. This is expected to create attractive opportunities for the LV and MV switchgear market. Global LV and MV switchgear market will exhibit a CAGR of 6.8% between 2016 and 2024.It will give impact in top line & bottom line growt
    6. Industrial Fan market shrunk by nearly 40% in last two years can give boost to the company sale.
    7. North Indian Batting Order (Ranking): Being a prime “Quality” parameter, 4 (Four) AYCL gardens featured in Top10, 4 (Four) gardens between Top11 to Top20 and rest i.e. 3 (Three) gardens/manufacturing units between Top21 to Top29. Thus, all Assam & Dooars Gardens are now within Top 29 during the fiscal year 2016-17 which emphasises marked improvement in the batting order/ ranking.
    8. Robust distribution chain – Packet tea outlet
    9. Bagged first 220kV Order from TSGENCO (supply of 1No 12.5MVA, 220/33kV Power Transformer for Pulichintala Hydro Power Station).
    10. Good order book for engineering section.

     

     

     

    Recommendation:

    • Stock CMP is 36 Rs. and stock is trading at high P/E 89 but due to above all factors plus reduction in debt may improve profit margin in future. Hence stock may touch 70 Rs. Within 2 years’ time horizon.

     

     

     

    Please note:

    • Note: The articles are not research reports but assimilation of information available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations” Disclosure: It is safe to assume that I might have the discussed companies in my portfolio and hence my point of view can be biased. Readers should consult registered consultants before making any investments.

     

     

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