Sunday, July 3, 2011

McLeod Russel - Buy

Mcleod Russel

CMP Rs 262

The impact of a series of acquisitions in the past five years is starting to reflect in the financials now. Mcleod Russel's topline has grown by 28% in Q4, mostly due to higher sales volume from tea gardens in Uganda. An increase in tea prices also helped it to post good numbers last year.

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The moot question is whether this performance will be sustained in the coming years. Analysts feel this is so because tea prices will remain high. "We expect the export prices to be high, especially due to the reduced production in Africa and flat production in Sri Lanka," says Sanjay Manyal, analyst at ICICI Securities.

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Analysts believe that the management may go for more acquisitions in Africa, thus helping boost the sales volume. Since the stock is trading at a reasonable valuation (trailing PE of 11.53), consider the scrip for long-term gains.

Our Recommendation :

This is a long term pick buy on declines and hold for 12-18 months for a decent return.

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