BCL In­dus­tries & In­fras­truc­tures Ltd: Bar­gain bet

Money Times - - Expert Eye - By Vi­hari

(BSE Code: 524332) (CMP: Rs.85.75) (FV: Rs.10)

Pro­moted by Mr. Ra­jin­der Mit­tal in 1976 as Bhatinda Chem­i­cals, BCL In­dus­tries & In­fras­truc­tures Ltd (BCL) is one of the largest agro-based com­pa­nies in North In­dia with a ver­ti­cally in­te­grated plant. Its man­u­fac­tur­ing unit is lo­cated at Bhatinda in Pun­jab. BCL op­er­ates through three seg­ments - Ed­i­ble Oils; Dis­tillery; and Real Es­tate. Ed­i­ble Oil ex­trac­tion and Dis­tillery ac­counted for 64.5% and 32% of its to­tal rev­enue in FY17. BCL’s ‘ed­i­ble oil’ business in­cludes re­fined vegetable oil, vanas­pati ghee, mus­tard oil, rice, etc, which are sold un­der the fol­low­ing brands - Home­cook, Vanas­pati, Do Kha­joor, Murli, etc. It pur­chased an Ed­i­ble oil and Rice Shelling unit (Kis­san Fats Ltd) at Jalal­abad in Pun­jab in 2002. This unit has a 3 MW state-of-the-art co-gen­er­a­tion power plant for cap­tive con­sump­tion, which runs on non-con­ven­tional en­ergy sources. Both the plants are equipped with mod­ern tech­nol­ogy. Its to­tal power plant ca­pac­ity is 8 MW.

BCL’s dis­tillery pro­duces a va­ri­ety of In­dian made for­eign liquors (IMFL) like Gin, Whisky and Rum. Its 100 KLPD dis­tillery started in FY13 at Bhatinda at a capex of Rs.35 crore to man­u­fac­ture a wide range of liquors un­der the brands ‘Asli Santra’, ‘Ranja Sounfi’, ‘Pun­jab Spe­cial’ Whisky/Rum/Dry Gin, ‘Ra­jd­hani Spe­cial’ Whisky, ‘Masaledar’ Sharab and IMFL ‘9 Star’ Whisky. It has un­der­taken capex of Rs.55 crore to add 100 KLPD in a dis­tillery unit spread over 4.3 acres along with a 8 MW power plant. Its to­tal ca­pac­ity now stands at 325 KLPD. BCL’s real es­tate ver­ti­cal, which cur­rently con­trib­utes only 3.5% to the to­tal rev­enues, is pro­gress­ing well. The in­come from this seg­ment zoomed 140% to Rs.22.5 crore in FY17 from Rs.9.4 crore in FY16.

For FY17, BCL’s net profit soared 55% to Rs.10 crore on 27% higher sales of Rs.671 crore fetch­ing an EPS of Rs.7.1 and a div­i­dend of 10% was paid. Dur­ing Q1FY18, it posted 76% higher net profit of Rs.4.6 crore on 32% higher sales of Rs.171 crore fetch­ing an EPS of Rs.3.2.

With an equity cap­i­tal of Rs.14.2 crore and re­serves of Rs.82.9 crore, BCL’s share book value works out to Rs.69. Its bor­row­ings are Rs.229 crore. Cash and short-term loans of Rs.31 crore give it a net DER of 2.2:1, which is a bit high due to its dis­tillery project. The value of its gross block is Rs.213 crore. The pro­mot­ers hold 51% of the equity cap­i­tal and PCBs hold 38.1%, which leaves just 10.9% stake with the in­vest­ing pub­lic. Ac­cord­ing to the lat­est IMARC sur­vey, BCL ranks sev­enth in of ex­tra neu­tral al­co­hol (ENA) pro­duc­tion in In­dia. It aims to be the No.1 player along with its as­so­ci­ates af­ter set­ting up the Kharag­pur unit through its sub­sidiary - Svak­sha Dis­tillery Ltd. This is a part­ner­ship project with Kolkata-based Svarna In­fra­struc­ture for set­ting up a 200 KLPD ca­pac­ity plant and a 8 MW co-gen­er­a­tion plant across 20 acres of land. With the com­mis­sion­ing of this plant in FY19, BCL will emerge as In­dia’s largest grain-based al­co­hol man­u­fac­tur­ing com­pany with 525 KLPD ca­pac­ity. Of the ag­gre­gate ca­pac­ity of 980 KLPD of ENA in North In­dia, ~325 KLPD or ap­prox­i­mately 33% is owned by BCL and its as­so­ci­ates. Go­ing for­ward, BCL’s key ob­jec­tive is to add ca­pac­ity to its dis­til­la­tion business to con­sol­i­date its po­si­tion and en­hance its mar­ket share. The per capita ed­i­ble oil con­sump­tion in In­dia has grown to ~14.7 kg. How­ever, this re­mains be­low the es­ti­mated world av­er­age of ~21.6 kg. The grow­ing pop­u­la­tion, ris­ing in­come lev­els and im­proved sup­ply con­di­tions are likely to boost the con­sump­tion of ed­i­ble oil go­ing for­ward.

The In­dian al­co­holic bev­er­ages mar­ket is one of the fastest grow­ing mar­kets in the world with sev­eral un­ex­plored seg­ments. With a com­pelling business po­ten­tial and economies of scale poised by the mar­ket, in­ter­na­tional play­ers are ex­pected to ex­pand their op­er­a­tions in the In­dian al­co­holic drinks mar­ket in fu­ture. The In­dian al­co­holic bev­er­age mar­ket is ex­pected to grow at 11.1% CAGR dur­ing FY15-20. (Source: KEN Re­search).

In­dia is emerg­ing as the largest global mar­ket for whisky with sales of over 60 mil­lion cases per an­num. Other spir­its (Brown – Brandy/Rum, White – Gin/Vodka/Rum) con­sti­tute the bal­ance 40% of the IMFL mar­ket. White spir­its, al­though only 5% of the mar­ket, are grow­ing at a much faster pace of 40% per an­num as against the 10-12% growth of the over­all IMFL mar­ket. Tra­di­tion­ally, BCL fares bet­ter in the last quar­ter. Based on the cur­rent go­ing, BCL is ex­pected to post an EPS of Rs.12.5 in FY18 and Rs.15 in FY19. At the CMP of Rs.85.75, the stock trades at a P/E of just 6.86x on FY18E and 5.71x on FY19E earn­ings as against the in­dus­try av­er­age P/E of 11x for the sol­vent ex­trac­tion seg­ment and 90x for the brew­ery and dis­tillery seg­ment. The high av­er­age P/E of dis­tillery is due to the high P/E ra­tios of United Spir­its and United Brew­eries. The liq­uid­ity in this counter is rather low but will im­prove as the com­pany posts good re­sults go­ing for­ward. The liq­uid­ity is ex­pected to rise fur­ther once value buy­ing starts in the counter af­ter the com­pany’s prospects be­come more vis­i­ble. The stock has the po­ten­tial to ap­pre­ci­ate around 40% in the medium-term with a price tar­get of Rs.120 at a for­ward P/E of 8x on FY19E earn­ings.

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