Prabhudas Lilladher is bullish on KS Oils and has recommended buy rating on the stock with a target of Rs 88, in its December 23, 2009 research report.
“KS Oils (KSO) is a market leader in the Rs130bn mustard oil market, with 11% market share (FY09). It also has ~30% market share in branded mustard oil segment (current market size of ~Rs39bn) which is expected to grow at ~25% CAGR, going forward. By FY11, the company is expanding its mustard oil crushing capacity by ~3x (of its FY09 capacity). We believe that the multi-product brand portfolio will push KSO to capture the growing branded mustard oil market. Further, KSO is expanding ~4x of its FY09 refined oil capacity by FY11. We believe that a strong market presence in mustard oil, strong brands and rich experience in edible oil industry will help KSO capture the ~Rs600bn refined oil market in India.”
“Based on one year forward P/E, KSO is trading at a discount to its global as well as domestic peers despite having higher earnings CAGR and higher return ratios (RoE). We are positive on the stock on account of its strong edible oil market presence, its growth potential and discounted valuation. At present, stock is trading at near to lower end of its historical forward P/E band of 8x-14x. Hence, we recommend ‘BUY’ the stock,” says Prabhudas Lilladher research report.
