March 15, 2011 - “Incorporated on the October 27, 1945 Jay Shree Tea & Industries Ltd (JTIL), a well diversified conglomerate of B.K. Birla Group of Companies, acquired a growing number of tea estates in both North and South India and initiated innovative, intensive and integrated field development work on all fronts. JTIL has adopted a marketing strategy to provide Garden Fresh Tea to all its clients. Besides tea, JTIL manufactures Single Super phosphate and Sulphuric Acid. The company is also engaged in Warehousing activities at Calcutta and Kochi. It has also developed prestigious residential and commercial complexes at Calcutta and Bangalore. JTIL has under its fold 22 tea estates including two estates in its subsidiary spread all over India and manufactures around 15 million Kgs of tea per annum. Total area under tea is around 8000 Hectares. JTIL produces around 10% of total Darjeeling tea produced in the country.”
“JTIL has successfully invested surplus funds in treasury instruments. The returns from these investments have helped the company to better manage its interest costs. Interest cost of the company in FY10 decreased by approximately 26%. Active treasury management by the company has helped to keep its interest cost low which would otherwise be at higher levels. Increase its tea yields through better agricultural practices resulting in substantially lowering raw material and miscellaneous expenses per unit of sales. Focus on increasing its revenues by maximizing its quantity produced. The company has acquired estates in Rwanda and Uganda to the tune of USD 6.5 million for the control of 11.3 million kgs in East Africa. Assam tea is a good blend with Ugandan Tea which shall augur well for the shareholders in the long run. Indian tea is widely sought in the export market. India will be facing a 100 mn kgs deficit in tea production at the starting of the new season in April leading to increase in export prices. Foray into sugar industry with the acquisition of MP Chini Industries. This is likely to hedge the revenue streams of JTIL by diversifying its existing portfolio which was earlier focused on tea and fertilizers.”
“We expect bouyant tea prices in near term. Moreover, recent rally in JTIL prices seems to have factored in most of this bouyancy. JTIL holds a leading position in tea industry. Stock is currently trading at a PE of 4.61x FY12E and 3.85x FY13E EPS. We recommend HOLD rating on the stock with a 18 months target price of Rs 192, at 4.5x FY13E earnings, giving it an upside of 17% from the current levels,” says SKP Securities research report.