ARIES AGRO LIMITED

ARIES AGRO

CMP 135 MARKET CAP 183 CR  BV 75, DEBT 99 CRORES AS ON SEP 2010

PRODUCTS:

NONE OF THE FOLLOWING PRODUCTS HAS GOT ANY SUBSIDY FROM GOVT OR HAS ANY PRICE CONTROL FROM GOVT.

1.       WATER SOLUBLE NPK FERTILISERS (12% OF SALES, GROSS MARGINS OF 12%),

2.       SECONDARY NUTRIENTS ( 10% OF SALES, 30% GROSS MARGINS),

3.       VALUE ADDED MICRO NUTRIENTS ( 58% OF SALES, 55% GROSS MARGINS),

4.       INORGANIC MICRONUTRIENTS (9% OF SALES, 15% GROSS MARGINS)

IN ALL, ARIES HAS  A PRODUCT RANGE OF 76 PRODUCTS ACROSS  VARIOUS SEGMENTS.

CAPACITY UTILISATION: TOTAL INSTALLED CAPACITY OF STANDALONE ENTITY IN INDIA IS 84,600 TONS SPREAD ACROSS 6 LOCATIONS AND UTILISATION FOR FY 10 WAS 42% WHICH IS SLATED TO INCREASE TO 57% IN FY 11 AND 71% IN FY 12.  THROUGH THEIR SUBSIDIARY IN FUJAIRAH AND SHARJAH, THE COMPANY HAS AN ADDITIONAL CAPACITY OF ANOTHER 70,000 MT.

REGION WISE SALES: MAJORITY OF SALES COMES FROM ANDHRA PRADESH -23%,  WEST BENGAL – 15%, MAHARASHTRA – 15% , UP – 10%, PUNJAB – 7%, AND MINOR CONTRIBUTION OF AROUND 1-4% COMING FROM VARIOUS OTHER STATES AND 3% FROM EXPORTS.

DISTRIBUTION CHANNELS -- COMPANY HAS 25 BRANCHES SPREAD ACROSS 22 STATES, MORE THAN 5600 DISTRIBUTORS, AND DIRECT LINK TO 79000 PLUS RETAIL DEALERS.

FOR DISTRIBUTION OF ITS PRODUCTS AND APPROACHING RURAL REGIONS, COMPANY HAS EMPLOYED A FLEET OF 100 KRISHI VIGYAN VAHANS – VEHICLES TO PROMOTE ITS PRODUCTS.

SUBSIDIARIES: 

COMPANY HAS OVERSEAS PRESENCE IN SHARJAH THROUGH GOLDEN HARVEST MIDDLE EAST FZE WHERE IT MANUFACTURES CHELATES. THIS UNIT COMMENCED COMMERCIAL PRODUCTION IN OCT 2008.

IT HAS ALSO ESTABLISHED AMARAK CHEMICALS FZC IN UAE TO TAP THE EASY AVAILABILITY OF SULPHUR BYPRODUCTS (WHICH ARE MAJOR RAW MATERIALS FOR THE COMPANY) FROM THE OIL REFINERIES LOCATED THERE.  TRIAL PRODUCTION COMMENCED IN JULY 2010. FINAL INSPECTION AND REGULATORY APPROVALS ARE PENDING.

THE COMPANY IS TARGETING INTERNATIONAL MARKETS IN VARIOUS COUNTRIES ( ASIA, MIDDLE EAST, AFRICA, EUROPE) AND EXPECTS INTERNATIONAL SALES TO BE 21% OF TOTAL REVENUES IN FY 11 AND 33% OF TOTAL REVENUES IN FY 12. IN FY 10, INTL SALES CONTRIBUTED 9.85% TO TOTAL SALES.

QUARTERLY RESULTS FOR LAST SIX QUARTERS

QUARTER	JUN 09	SEP 09	DEC 09	MAR 10	JUN 10	SEP 10
SALES	18.19	33.6	51.72	36.29	21.75	46.64
PBIDT	2.93	7.1	11.88	5.33	5.17	9.74
INT	1.36	1.89	2.06	1.9	2.67	2.68
TAX	0.3	1.5	3.1	0.8	0.55	2.11
NP	0.06	3.41	6.46	2.24	0.84	4.83

THERE IS SEASONALITY IN THE BUSINESS WITH DECEMBER BEING THE BEST QUARTER FOLLOWED BY SEPT, MARCH AND JUNE WHICH IS THE WORST.

LAST SIX YEARS RESULTS:

YEAR	05	06	07	08	09	10	H1 FY 11
SALES	39	59	74	103	110	139	68
NP	0.81	6.67	8.45	11.16	1.28	11.14	5.67

FOR FY 10, CONSOLIDATED SALES WERE WAS 152 CRORES AND CONS NET PROFIT WAS 14.81 CRORES, YIELDING AN EPS OF 11.4 BASED ON FULLY DILUTED EQUITY.

THE COMPANY EXPECTS TO DO CONS SALES OF 225 CRORES AND NET PROFITS OF 29 CRORES FOR FY 11 (STANDALONE SALES FOR FY 11E 175 CR AND NET PROFITS 19 CR) AND CONS SALES OF 295 CRORES AND NET PROFITS OF 40 CRORES FOR FY 12 (STANDALONE SALES FOR FY 12E 205 CR AND NET PROFITS OF 23.75).  IF THE COMPANY DOES MANAGE TO MEET ITS TARGETS THEN BASED ON FY 12 EARNINGS OF 30 PER SHARE, THIS STOCK DOES LOOK VERY APPEALING AT CMP OF 135.

BUT THE MANAGEMENT PROJECTIONS HAVE TO BE TAKEN WITH A PINCH OF SALT BECAUSE IN NOV 09 PRESENTATION, THE COMPANY HAD PROJECTED SALES OF 165 CRORES (ACTUAL ACHIEVED 139 CR) AND NET PROFITS OF 13.4 CR (ACTUAL ACHIEVED 11.14 CR) FOR FY 10.