-INSTITUTIONAL RESEARCH

Initiating Coverage

Solvent Extraction

Buy
CMP-NSE (1/7/2008) Target Price12-15 months Face value Market cap(Rs in mn) Total O/S shares mn Free Float 52 week High/Low Avg. Monthly Vol. (BSE) Avg Monthly Vol. (NSE) BSE Code NSE Code Bloomberg code Beta Date of Incorporation Last Dividend Declared Six month's return Indices 86 131 2 16169.87 188.79 62.44% 165/68 126539 157554 500368 RUCHISOYA RSI IN 0.67 1986 24% -44.80% BSE 500

Ruchi Soya Industries Ltd.

2nd July, 2008
Established in 1986, Ruchi Soya is among the largest producer and suppliers of vegetable Oil and Soya Food in India. One of the highest exporter of Soya meal,Ruchi Soya Ltd., is the flagship Company of Ruchi Group of Industries with an annual turnover of Rs 11,000crs for FY 08 and one of the largest agribusiness company in India.Ruchi is having a well established market presence through its strong brand portfolio of Nutrela, Ruchi Gold ,Nutrela N'Rich,Mahakosh Oil.It has also marked its presence in the retail segment by tying up with retail giants like Pantaloon Retail,Reliance Retail, Aditya Birla etc.

Investment Highlights
n Favorable business model with increased share of manufacturing products from 33% to 76% in six years and is further expected to go up to 90% over a period of next 2-3 yrs.Higher EBITDA margins for the manufacturing products of around 6% to 9.5% as compared to the EBITDA margins of 1% for trading goods shall gear up the overall profitability of the Company. n Ruchi has carved a niche for itself by creating a strong branded portfolio which accounts for 29% of the business. It has recently launched low calorie, protein drink N'rich for its premium customers and expects to have a market share of around 10% within 2-3 yrs. n Branded Oil segment has been growing at a CAGR of 28% over a period of 6 years and maintains a leadership position in the branded oil segment accounting for 13% of the Indian edible oil consumption. n Venturing into high margin mustard oil segment targeting a turnover of Rs 1500 crs toRs 2000 crs over a period of next two to three years which shall add another Rs120crs to its EBIT. n Competitive prices and high quality of Indian Soya meal in the global markets places Ruchi in a sweet spot to capture the benefit of demand supply gap.A substantial 25% market share in the International markets for this DOC/Soya meal proves to be highly profitable for Ruchi. n Undertaking vertical integration of palm plantation and Jatropha plantation alongwith forward integration into the bio fuel business within next 2-3 years will help curbing against the increasing crude palm oil price and capitalize on the untapped potential in the bio fuel segment thereby resulting in an overall increase in the profitability of the company.

One year price chart

Valuations
At the CMP of Rs. 86 stock is trading at a P/E of 11.9x, 10.1x and 7.20 x discounting its FY08E, FY09E and FY10E earnings respectively. On EV/EBIDTA basis, stock is trading at 7.4x, 5.4x and 4.0 x its EBITDA for FY08E, FY09E and FY10E respectively. The rising demand for edibleoil, customers preference for branded products, firm demand and price scenario of soya meal in the international markets shall help Ruchi in scaling new highs and hence we recommend a Buy on the stock with a 12-15 month price target of Rs. 131 based on 11 x FY 10E.Our target price offers a potential return of 52% on the CMP. Financial Snapshot Net Sales
Promoters, 37.55%

Source: Capitaline

Shareholding Pattern
Public & others, 8.67% Institutions, 6.31%

FY06 7540 234 88 24.2 4.7 18.3 10.1 14.34 a : actual

FY07 8625 298 101 27.6 4.6 18.5 8.9 11.94

FYO8a 11000 428.8 157 8.3 7.2 11.9 7.4 15.81

FYO9E 12650 496 185 9.8 8.5 10.1 5.4 15.51

FYO10E 14674 622 260 11.9 11.9 7.2 4.0 17.27

EBITDA PAT EPS(Basic) EPS (Diluted) P/E (x) EV/EBITDA (x) ROE(%) Rs in crs E : expected

FIIs, 26.47%

Non Promoter Holding, 20.99%

Source : Company, KJMC Research

Source : KJMC Research

KJMC RESEARCH
KJMC Research is also available on Bloomberg (KJMC <Go>)

Shefali Doshi Research Analyst +91 022 4094 5500 Ext. 202 shefali.doshi@kjmc.com

Ruchi Soya Industries Ltd

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Analyst Certification
I hereby certify that the views expressed in this document reflect my personal views. I also certify that no part of my respective compensation was, is, or will be, directly or indirectly, related to the views expressed in this document. I do not own any amount of stock in the company recommended/covered in this report.

General data sources

Company, Capitaline, Public domain, Solvent Extractors Association of India, Rabo Bank and AC Nielsen.

KJMC RESEARCH

Ruchi Soya Industries Ltd

C O N T E N T S
Investment Highlights 4

Company Profile

SWOT Analysis

12

Industry Outlook

13

Peer Comparison

14

Outlook and Valuation

16

Financial Summary

18

KJMC RESEARCH

Ruchi Soya Industries Ltd

Investment Highlights

From Supply chain to manufacturing

Withfive standalone port based refiners,four standalone crushing plants and five integrated crushing and refining plants, Ruchi Soya has redesigned its business model to increase the contribution of its manufacturing products to 76% from 33% in a period of 6 years. Currently the manufacturing products contributes 76% and the Company looks forward to increase the share of manufacturing products to 90% in a span of another 2-3 years with 20% - 30% y- o - y growth in the manufacturing sales. Over a period of 5 years the company has made significant expansion and a multifold increase in its refining and crushing capacities as a conscious move to redesign its business model. EBITDA margins for manufacturing products are higher and hovers anywhere between 6% to 9% as compared to trading products which are around 1% and hence we expect that this will boost the overall profitability of the company in future. During the period of 6 yrs from 2002-2008, Ruchi had undertaken substantial expansion plans for increasing its installed capacities to meet the ever increasing demand.The installed capacities for various divisions
Capacities ('000 MTPA) Solvent Extraction Refinery Vanaspati/bakery fats TSP 2002 600 180 112 24 2008 2893 2112 470 140 Multiplier 5x 12x 4x 6x

Looks forward to increase the share of manufacturing products to 90% in a span of another 2-3 years...

Source: Company, KJMC Research

Ruchi has carved a niche for itself by creating a strong branded portfolio. Currently focusing to capture the markets for health and diet related products
As per the AC Nelson data ,in refined oil in consumer pack(ROCP), Ruchi have maintained leadership position on the branded sale both in terms of volume as well as value with a market share of 19.8% in terms of volume and 19.2% in value terms. Refined Palm and Soya Oil manufactured by Ruchi has a market share of 17% and 28% respectively. Its brand Nutrela has a market share of around 55% where as its second leading brand Ruchi Gold is having a market share of 60% and has grown at a CAGR of 35% - 40% since its introduction. . For the year ended March 08 the branded sales, which is 29% of the total manufacturing sales have grown by 44.63% at Rs 3,218 crores which will result in increasing the bottom line of the company as the branded segment enjoys higher EBITDA margins of 6-9% in comparison to the bulk side having EBITDA margins of 4.50 %. In the overall branded sales, the soya and palm are having a significant share. Ruchi has very recently ventured into the estimated Rs 2,250 cr package and the branded fruit juice market and is targeting a 10% market share over a period of next 2 3 years .In a move to capitalize on the growing consumer demand for nutritious as well as health related products and as a strategic move to cater to its premium customer segments in a better way, Ruchi expanded its product portfolio by launching N'rich a lowcalorie protien drink containing ingredients from natural sources which

Branded portfolio constitute 29% of manufacturing business...

KJMC RESEARCH

Ruchi Soya Industries Ltd

helps to defend life style disease. Ruchi has already been selling soya nuggets.Thus the additions of new products in its portfolio which enjoy higher margins shall positively impact the revenue and the profitability of the Company.

Maintains a leadership position in the branded oil segment

The size of the domestic edible oil Industry is about 80,000 crores growing at 6.5% to 7% whereas the packaged food is growing at 15% for the past five years.
FY 07- Sales of Oil in Rs (crs.)

6050 5050 4050 3050 2050 1050 50 Agro Tech Foods K S Oils Ruchi Soya Inds.
Source: KJMC Research

Accounts for around 13% of the Indian edible oil Consumption and enjoys a 20% market share in branded packaged edible oil segment...

The Company currently accounts for around 13% of the Indian edible oil Consumption and enjoys a 20% market share in branded packaged edible oil segment which has an average EBITDA margins of 6.5% ,higher then the margins for bulk manufacturing as well as trading. The Companies branded Oil segment has grown at a CAGR of 28% over a period of 6 years with brand Nutrela having a 13% market share in the entire branded products sale.Ruchi is an undisputed leader in the branded edible oil category with brands like Nutrela Soyumn -Soyabean Oil, Ruchi Gold Palmolein Oil, Sunrich Sunflower Oil, Mandap-Mustard Oil. Soyabean oil and Palm oil are the two major edible oils in the branded segment contributing 57% and 33% respectively to the sales of branded edible oil category. Currently the packaged edible oil consumption is only about 20% of the total 12.5 million tonne of domestic consumption and with growing quality consciousness and plummeting price differences between packaged and non-packaged edible oils, the packaged edible oil sector will capture 50% of the market share within three years. The packaged edible oil industry is growing at 10% annually and half of the market will be controlled by packaged oil manufactures within three years. In view of the growing demand of branded edible oils and increase in consumption of oil to 21.3 mln tonnes by 2015, Ruchi which is enjoying a virtual leadership is well poised to capitalize the opportunity in the branded edible oil segment.

Entering into low cost high margin mustard oil segment

Indian vegetable oil economy is world's third largest after USA and China . Three oilseeds - Groundnut, Soybean and Rapeseed/ Mustard - together account for over 80 per cent of aggregate cultivated oilseeds output. Mustard seed alone contributes Rs.12,000crs turnover out of Rs.80,000crs oilseed based domestic turnover.

KJMC RESEARCH

Ruchi Soya Industries Ltd

Expects a turnover of ~ Rs1,500 to Rs 2,000 crs which will add another Rs 120 crs to its EBITDA...

With steady growth in population and personal income, Indian per capita consumption of edible oil has been growing steadily. However, oilseeds output and in turn, vegetable oil production have been trailing consumption growth, necessitating imports to meet supply shortfall. Though Mustard plants grow all over the world, their cultivation is mainly confined to India, China, Canada, Germany, France, Australia and the United States. India is the third largest mustard seed producer in the world, with 12 per cent of world's total production grown domestically and crop accounts for nearly one-third of the oil produced in India, making it the country's second most important edible oil after groundnut. Considering the growth of the domestic oil consumption in edible oils such as Mustard, Cottonseed and Rice bran, the company has aggressive plans to expand in the higher margins lower capital cost segment for business growth and more specifically the retail segment. Mustard suffers less from the international competition and it is not likely to be affected by the imports. Also the operations for mustard are less technology oriented. The margins are higher (8% EBITDA margin) because the price realization of the mustard is higher than say palm and soya. Mustard oil segment is growing at a rate of 20% and considering a 15% market share of the Mustard oil industry Ruchi expects a turnover of ~ Rs1,500 to Rs 2,000 crs which will add another Rs 120 crs to its EBITDA . Hence on a long term basis the highly profitable mustard oil segment shall propel the profitability of the Company and improve the earnings of the Company.

Is enjoying a 25% share in global markets for this de-Oiled cakes...

Competitive Prices of Indian Soya meal in the global markets places Ruchi in a sweet spot to capture the benefit of demand supply gap.
The demand for soya meals is expected to increase significantly as the feeding of livestock continues to expand, especially in rapidly developing countries. Canada alone is expected to import $300 million of soymeal.Indian Soya meal is having wider consumer base in International markets on account of various factors viz:
n n n

Cheaper as compared to American or Brazilian Soya meal Has a high protein content of 48%. Only India supplies non genetically modified soya meal while other countries manufactures genetically modified soya meal.

As a result there is a growing demand of Indian Soya meal from Countries like China, Indonesia,Japan, Korea and to a lesser extent some European nations.

KJMC RESEARCH

Ruchi Soya Industries Ltd Soy Meal Export from India

Port
Vietnam Japan Indonesia thailand South Korea China Sri Lank Phillipines Malasia S. Africa Taiwan Signapore

Soy Meal Apr'07-Jan'08

1019850 505475 312300 202675 161025 132325 41225 36875 29250 6850 2675 375

%Share
38.051 18.860 11.652 7.562 6.008 4.937 1.538 1.376 1.094 1.256 0.100 0.014
Source: KJMC Research

Soymeal exports accounts for 84% of the total edible oilseed meal exports from the country and India exports around 65% of the country's soymeal production. In 2006-07 there was a record exports of oilmeals of 51.64 lakh tons valued at Rs 4,300 crs recording a growth of 17%. Ruchi which is enjoying a 25% share in global markets for this de-Oiled cakes is stand to gain in terms of improving the profitability of the Company in FY 08 as well as in the long run.

KJMC RESEARCH

Ruchi Soya Industries Ltd

Undertaking vertical integration of palm and Jatropha plantation.

Over the last few years, per capita consumption of edible oil in India has grown from 9.53 Kgs in 2002-03 to the current level of about 12.0 Kgs and the total demand is expected to grow from current level of about 10 million MTs to 16 Million MTs in 2010 and further 21 million MTs in 2015. In India The domestic production of vegetable oils is only around 7 8 million MTs, the balance requirement has to be fulfilled by imports of Palm oil from Malaysia and Indonesia and Soya oil from Argentina and Brazil. Palm oil imports have witnessed an increasing trend on account of it being relatively cheaper.
2004 Total Demand (mln tonnes) Domestic supply of edible oils(mln tonnes) Total edible oil imports( mln tonnes) Imports as share of demand 10.9 7 4.3 39.40% 2010 15.6 10.1 5.9 38.10% 2015 21.3 13.4 8.3 39.50%

Source: Rabo Bank

India is one of the largest consumer importers of edible oil in the world, next to China and US. Being the largest importer of palm oil, Ruchi is considering on the vertical integration of its palm plantation as part of its strategic move because it is absolutely critical in the years to come to maintain its leadership position in the domestic markets in edible palm oil segment. It is also eyeing an opportunity at setting up Greenfield palm plantations in Indonesia. This will also prove as a shield against the rising palm oil prices.
Acquiring palm plantations will significantly reduce the procurement cost of the raw material and thereby increase its profitability...

Currently the edible oil imports are around 4.5 to 5 million tons of which palm oil has got more than 60% market share and hence acquiring palm plantations will significantly reduce the procurement cost of the raw material and thereby increase its profitability.

It is also considering to enter into Jatropha plantations and bio-fuel business and effectively utilize its expertise in agri-crushing business.

KJMC RESEARCH

Ruchi Soya Industries Ltd

Company Profile

Ruchi Soya is one of the largest player in India's branded edible oil category accounting for 20 % of the domestic market share with over 7000 TPD of refining and over 9560 TPD of crushing capacities .It is the largest Company in the edible oil & Oilseed Industry with a distribution network of around 5,83,000 retail outlets. Being the first exporter of Soyabean meal from India, it has grown to become a multi-million US Dollar company with two of strongest brands, Nutrela and Ruchi Gold .It has to its credit Highest Importer & Exporter of Oil Meals for 2006 awarded by GLOBEOIL India. Its leading brand "Nutrela" caters to premium segment and offers healthy options in soya foods and edible oils. The Company also have a firm footing in modern retail due to single minded focus on new channels of distribution through its alliances with big players like Pantaloon and has a visible presence in all leading national and regional supermarkets .It has huge expansion plans to grow and hold a firm footing in the market through expansion of its consumer base and product portfolio. Currently it operates through a network of five standalone port based refiners,four standalone crushing plants and five integrated crushing and refining plants. The various segments which generates revenue for the Company are:-

Revenue Segments
n Oils Crude oils,Refined Oils n Vanaspati and specified fats n Extractions All types of seed extractions,Textured Soya Protein, Soya

flour.
n Others trading in Rice,Wheat,Maize,Barley,Gram,Tuar,Peas,Soaps

Revenue mix for FY08

2% 22%

9% 67% Oils Vanaspati Extractors Others

Source: Company, KJMC Research

Revenue Mix FY 08 v/s FY 07 8000

300 250

EBIT FY 08 v/s FY 07

Rs in( crs)

6000

Rs in( crs)

200 150 100 50 0

4000

2000

0 Oil Vanaspati FY 08 Seed extraction FY 07 Others

Oil

Vanaspati

Seed extraction

Others

FY 08

FY 07

Source: Company, KJMC Research

KJMC RESEARCH

Ruchi Soya Industries Ltd

COMPANY'S PRODUCTS PORTFOLIO

EDIBLE OIL MAHAKOSH OIL Soyabean oil, Sunflower oil, Cottonseed oil, Groundnut oil, Mustard oil RUCHI GOLD Palmolein oil, Mustard oil NUTRELA Soyumm oil, Sunflower oil, Mustard oil, Groundnut oil, Rice bran oil

VANASPATHI NUTRIGOLD Formulated after extensive R&D, is a product which has an almost 'ghee like grainy texture RUCHI NO.1 Is a hydrogenated vegetable fat

SOYA FOODS NUTRELA Chunks, Granules and Mini Chunks NUTRELA Proflo Soya Flour

SOAPS RUCHI NO.1 Lime, Rose petals, Jasmine, Sandalwood

BEVERAGES NUTRELA N'RICH Flavored protein drinks rich in vitamins, minerals and antioxidants.

Ruchi has well diversified presence through its plants & storage locations. A good mix & proximity to raw material as well as to market works in favour of the company.

Shriganganagar Baran Guna Kota Shujalpur Indore Kandla Gadarwara Jabalpur Haldia Nagpur Patal Ganga Chennai

Crushing
Mangalore

Refining

Source: Company, KJMC Research

KJMC RESEARCH

10

Ruchi Soya Industries Ltd PROFESSIONAL MANAGMENT

Dinesh Shahra
Managing Directors

S P Joshi
Director, Foreignn Trade

A B Rao
Director, Legal

Nitesh Shahra SAP

President - Refinery

Pradeep Koolwal
President, Crushing Integrated Risk Management System BeingDesigned

Sarvesh Shahra
Head - Food Division

Amrita Shahra
Head-New Business Dev & P.R.

Implementation

Naveen Gupta
VP. Operations

V Suresh Kumar
Head Corporate Finance

underway

Harish Singla
VP Sales & Marketing

Dr. S K Singh
VP, HR

By Ernst & Young

R L Gupta
V P Corp. Planning and Company Secretary

Mahesh Agrawal
VP, Corporate Account

Vinay Shah
VP, Banking

Yateendra Chaturvedi
GM, Information Technology

Ruchi has assinged a project to Hewitt Associated for designing HR policies post consollidation Source: Company

KJMC RESEARCH

11

Ruchi Soya Industries Ltd

Conversion of warrants

In order to fund the expansion plans, promoters of the Company have infused Rs 275 crs during FY 08 by way of 3,53,25000 warrants issued at Rs 77.50 and convertible into one equity share over a period of 18 months ,of which 64,00,000 warrants have been converted into equity shares as on 31st March 08.The effect of dilution on account of conversion of the entire 3,53,25,000 warrants have been considered in our projections.

SWOT Analysis

Strengths
n Multifold increase in capacity over years. n Well-dispersed mix of proximity to raw materials and accessibility to the

markets through its crushing and refining units.

n Has smartly moved from supply chain to manufacturing. n Has an efficient network of qualified and experienced operators and

engineers.
n Has built up a strong stable portfolio of brands. n Efficient marketing and distribution network covering over 5,83,000

retail outlets.

Weaknesses
n Companys raw materials are agro based and hence subject to volatility

in the national and international commodity markets.

Opportunities
n Foraying into other healthy food products under the brand Nutrela. n Strengthening its leadership in the branded edible oil segments. n Setting up of commodity exchanges have provided reasonable

opportunities for the industry as well as the company to hedge and manage the impact of price fluctuations.

Threats
n Exposed to foreign exchange risk on account of products which are

imported and further processed before sales in the domestic markets.

n Any change in Government policy with respect to edible oils /food items

can have a major impact on the profits of the company.

n The business is subject to many regulations by several authorities

which could have an adverse effect on company's business and the results of operation.

KJMC RESEARCH

12

Ruchi Soya Industries Ltd

Industry Outlook

Indian Oilseed sector accounts for

n Domestic turnover of Rs 80,000 crs . n Import and Export trade turnover of Rs 20,000 crs.

During 2006-07 India accounted for

n 7.4% of world oilseed production n 6.1% of world major meal production n 3.9% of world meals export n 5.8% of world oil production n 11.2% of World import of oils n 9.3% of world oil consumption

Inspite of being the fourth largest oil seed producing country globally, India is also one of the largest importers of edible oils. India's oil seed production is about 25 million tons compare to the world's oil seed production of about 400 million tons per annum.

Trends of Imports of Edible oils

Category Palm Segment Soybean Oil Sunflower Oil Other Oils Total 2002 2.93 1.48 0.00 0.02 4.43 2003 3.81 1.20 0.09 0.01 5.11 2004 3.41 0.91 0.08 0.00 4.40 2005 3.00 2.03 0.01 0.01 5.04 2006 2.57 1.72 0.10 0.02 4.42

Source: Solvent Extractor's Association of India, Annual Report 05-06

Though, India is importing almost 50% of its consumption requirement in the form of Soyabean oil, Sunflower oil and palm oil, the per capita consumption in India is still low in consumption of edible oil as compared to its global peers.
Oil and Fats Consumption
60 50 40 30 20 10 0 51 49 27 27 24 22 Kg/Yr

21

18

18

16

15

12 India

8 Bangladesh

E-15

Mexico

Poland

Japan

Egypt

USA

S. Korea

Russia

INdonesia

Turkey

India is 3rd Largest importer of vegetable oil in the world next to China & EU
Though, India is the fourth largest producer of oil seeds in the world, the capacity utilization of this sector has been between 35 and 50% affecting the health of the Industry adversely. The importance of the Industry can be judged from the fact that this sector contributes about 17 billion US Dollars in terms of turnover.

KJMC RESEARCH

China

Source: AC Nielsen

13

Ruchi Soya Industries Ltd

During the current year, oil seed acreage has shifted to grains in the world and the bulk decline occurred in US and China bean production. The total production of 5 major oil seeds is expected to decline in 2007 -08 over last year by 4 %. Of these crops, the world Soya production is likely to go down from 236 million Tons in 2006-07 to 221million Tons in 2007-08 (a fall of 6.4%). The Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the agriculture sector has improved to 12.5% for FY 06-07 from a low of 10.2% in 03-04. With a view to give a boost to the farming sector which is considered as a quintessential to the growth of the Indian economy the target for GCF has been raised to 16% during the Eleventh plan to achieve a growth rate of 4% from the current growth rate of 1.8% with a target GDP growth rate of 10%. In a move to curb the rising inflation which has risen to the highest the Government of India has scrapped the import duty on crude soybean and palm oil, and lowered the levy on refined edible oil to 7.5 percent on March 31'08. India, imports almost half the vegetable oil it needs from overseas.

Peer Comparision
Company Name Agro Tech Foods Guj. Ambuja Exp K S Oils Ruchi Soya Inds. Sanwaria Agro Vimal Oil Foods
Price as on 1st July, 2008.

TTM End 200803 200803 200803 200803 200803 200803

Price Earning (P/E) 17.70 6.93 12.12 10.47 12.14 2.88

Price to Book Value ( P/BV) 2.58 1.42 3.50 1.66 7.50 1.08

Price/Cash EPS (P/CEPS) 15.43 5.08 11.05 7.11 11.61 2.53

EV/EBIDTA 11.20 4.30 6.56 5.71 9.40 2.29

Market Cap/Sales 0.28 0.29 0.73 0.15 0.67 0.04

KJMC RESEARCH

14

Ruchi Soya Industries Ltd

Result Update
Particulars Net Sales Total Expenditure PBIDT Interest PBDT Depreciation Tax Reported Profit After Tax Equity Face Value PBIDTM(%) PBDTM(%) PATM (%) 4th Qtr 200803 3480.64 3362.3 129.34 41.01 88.33 25.61 1.15 37.72 37.76 2 3.72 2.54 1.08 4th Qtr 200703 2740.12 2654.02 89.6 29.5 60.1 18.02 3.58 27.85 36.48 10 3.27 2.19 1.02 VAR [%] 27.00 26.70 44.40 39.00 47.00 42.10 -67.90 35.40 3.50 -

PE -Band
210

160

Rs

110

Stock has been trading at an average P/E of 16x; highest P/E of 24x and lowest P/E of 12x...

60

10

KJMC RESEARCH

20 07 0 20 3 07 0 20 4 07 0 20 5 07 0 20 6 07 0 20 7 07 0 20 8 07 0 20 9 07 1 20 0 07 1 20 1 07 1 20 2 08 0 20 1 08 0 20 2 08 0 20 3 08 0 20 4 08 05
Ruchi Soya 12 20 6 14 22 8 16 24 10 18
Source: KJMC Research

15

Ruchi Soya Industries Ltd

Outlook & Valuations

CMP : Rs 86 (1/7/2008) Target Price : Rs 131

Ruchi's deliberate shift towards manufacturing products backed by buoyancy in consumption of branded edible oils and other health products, higher operating efficiencies arising from consolidation have helped the Company in demonstrating and delivering stable and improved financial performances for past few years. The Company has already installed its own 30.3 MW wind power plant at an approximate cost of Rs 100 crs which will reduce the operational costs of the company and increase its overall profitability. We are of the view that Ruchi is very well poised for a even higher growth trajectory in the next 2-3 years as the company's profitablitiy is expected to get a further boost on account of its foray into new and more profitable business segments like mustard oil, forward and backward integration into Jatropha and Palm plantation and a substantial ramp up in its installed capacity by another 1 million tonnes during FY08-FY11. Also the Unchanged tariff value and decreasing duty will benefit importers like Ruchi Soya by propelling their topline and the profitability.

Future Expansions
Capacity (000 TPA) Refining Seed crushing Vanaspati TPA a : actual E : expected FY07 2052 2668 470 140 FY08a 2112 2893 470 140 FY09E 2300 3090 470 140 FY10E 2472 3320 470 140 FY11E 2656 3670 470 140

Source: Company, KJMC Research

Activity based Sales composition (%) and EBITDA Margins

Activity Manufacturing% EBITDA % BrandedBulk Trading% EBITDA % 5.5%-7.0% 3.0%-3.75% 33%-25% 0.85-1.15% 7.0%-8.5% 3.75%-4.5% 20%-10% 1.15-1.25% FY 07-FY 08 67%- 75% FY 09E-FY11E 80%-90%

Source: Company, KJMC Research

In the current scenario of more then 50% of the players having an output of less then 60 MT/day with a capacity utilization of less then 30% and the absence of major integrated players, Ruchi's all around presence augurs well to capitalize on the 2300 crs untapped Indian branded edible oil industry. Ruchi's financial performance has remained very impressive with revenues growing at a CAGR of 22% over the last 6 years with PAT growing at a CAGR of 25% during the same period whereas its branded sales have recorded a CAGR of 28%. We expect the Company's topline to grow at a CAGR of 15% and the bottomline to grow at a CAGR of 29% for FY 08-FY10 For the quarter ended March,08 Net profit of the Company rose 35.44% to Rs 37.72 crore as against Rs 27.85 crore during the previous quarter ended March 2007 whereas during the same period Sales rose 27.03% to

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Ruchi Soya Industries Ltd

Rs 3480.64 crore as against Rs 2740.12 crore during the previous quarter ended March 2007. For the full year ended March 2008, net profit rose by 56.28% to Rs 157.36 crore in the year as against Rs 100.69 crore during the previous year ended March 2007 and Sales rose 27.53% to Rs 10999.82 crore as against Rs 8625.48 crore during the previous year ended March 2007. At the CMP of Rs. 86 stock is trading at a P/E of 11.9x, 10.1x and 7.20 x discounting its FY08E, FY09E and FY10E earnings respectively. On EV/EBIDTA basis, stock is trading at 7.4x, 5.4x and 4.0 x its EBITDA for FY08E, FY09E and FY10E respectively. The rising demand for edibleoil, customers preference for branded products, firm demand and price scenario of soya meal in the international markets shall help Ruchi in scaling new highs and hence we recommend a Buy on the stock with a 12-15 month price target of Rs. 131 based on 11 x FY 10E. Our target price offers a potential return of 52% on the CMP.

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Ruchi Soya Industries Ltd

Financial Summary
Profit & Loss Statement
Particulars Net Revenue Growth % Raw material cost Employee Cost Selling & Distribution exps. Manufacturing expenses Miscellaneous exps. Total Expenditures EBITDA EBITDA Margin Other income Dep.& Amortiz EBIT EBIT Margin Interest Expenses Tax PAT before exceptional items Exceptional Items & Minority Int. Adj PAT
E : Expected a : actual Rs. In Cr.

FY06 7,540.4 92% 6,794.2 23.4 219.5 242.5 42.5 7,322.1 233.8 3.1% 15.4 55.5 178.3 2.4% 53.3 36.8 88.2 -5.4 82.8

FY07 8,625.5 14% 7,687.0 27.0 271.9 276.3 87.9 8,350.0 298.2 3.5% 22.8 65.6 232.6 2.7% 76.1 55.8 100.8 0.0 100.8

FY08a 10,999.8 28% 9,782.3 44.2 330.0 275.0 160.5 10,592.0 428.8 3.9% 21.0 74.5 354.4 3.2% 105.7 91.0 157.4 0.0 157.4

FY09E 12,649.8 15% 11,353.2 41.7 316.2 316.2 151.8 12,179.2 495.6 3.9% 25.0 88.6 407.0 3.2% 117.6 104.2 185.2 0.0 185.2

FY10E 14,673.8 16% 13,133.0 48.4 330.2 366.8 198.1 14,076.6 622.2 4.2% 25.0 97.0 525.2 3.6% 118.8 146.3 260.1 0.0 260.1
Rs. In Cr.

Source : KJMC Research

Balance Sheet
Particulars Sources of Funds Share Capital Convertible warrants Reserve & Surplus Total Debt Deferred Tax Liability TOTAL Application of Funds Net Block Capital work in progress Investments Inventories Sundry Debtors Cash & cash Equivalents Loans & Advances Current Liabilities Net Current Assets Miscellaneous expenditure w/off TOTAL 1004 18 23 870 661 589 298 1531 887 0.5 1932 1058 20 42 958 826 671 482 1628 1309 0.2 2430 1183 25 42 2163 1045 195 550 2506 1447 0.2 2699 1245 29 42 1349 1202 589 632 2316 1457 0.2 2773 718 1076 56 1932 807 1470 72 2430 82 82 83 22 1002 1520 72 2699 83 22 1176 1420 72 2773 FY06 FY07 FY08E FY09E

FY10E

89 1642 1220 72 3023

1298 34 42 1565 1394 615 734 2659 1649 0.2 3023

Source : KJMC Research

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Ruchi Forge Ltd BharatSoya Industries Ltd

Ratios
Particulars Profitability & Return Ratios EBITDA Margin (%) NP Margin (%) EPS CEPS BVPS ROE ROACE Operating efficiency and other ratios Debtors T/o Inventory T/o Interest Coverage (x) Asset/Turnover (x) D/E (x) Valuation Ratios P/E (x) P/CEPS (x) P/BV (x) Mcap/Sales (x) EV/Sales (x) EV/EBITDA (x) 18.3 9.5 0.4 0.2 0.3 10.1 18.5 7.7 0.4 0.2 0.3 8.9 11.8 5.5 1.7 0.2 0.3 7.4 10.1 4.8 1.5 0.1 0.2 5.4 7.2 3.9 1.1 0.1 0.2 4.0 11.4 11.8 3.3 4.9 1.3 10.4 9.3 3.1 4.0 1.7 10.5 6.9 3.4 4.3 1.4 10.5 7.1 3.5 4.6 1.1 10.5 9.8 4.4 5.1 0.7 3.1 1.2 4.7 9.0 207.0 14.34 9.4 3.5 1.2 4.6 11.1 243.6 11.94 10.7 3.9 1.4 7.2 15.5 50.9 15.81 14.2 3.9 1.5 8.5 18.0 58.9 15.51 15.3 4.2 1.8 11.9 21.9 79.5 17.27 18.6 FY06 FY07 FY08E FY09E FY10E

Source : KJMC Research

Du-Pont Analysis
Particulars Profitability ratio Asset turnover ratio Leverage factor Return on Equity FY07 1.2 4.0 2.6 11.9 FY08E 1.4 4.3 2.6 15.8 FY09E 1.5 4.6 2.3 15.5 FY10E 1.8 5.1 1.9 17.3

Source : KJMC Research

Cash Flows
Particulars NET INCOME (LOSS) Net Cash Flow from Operating Activities Net Cash Flow from Financing Activities Net Cash Flow from Investing Activities TOTAL CASH FLOW Ending cash & cash equivalents FY06 125 109 216 (268) 594 588 FY07 157 (86) 261 (93) 83 671 FY08E 249 (383) 111 (205) (477) 195 FY09E 289 659 (111) (154) 394 589

Rs. In Cr.

FY10E 406 191 (10) (155) 26 615

Source : KJMC Research

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Ruchi Soya Industries Ltd

Mr. Vijay Dugad Senior V.P. & Head, Institutional Equities vijay.dugad@kjmc.com 2282 0388(D) 4094 5550(D)

Recommendation Parameters

Expected returns in absolute terms over a one-year period Buy Reduce Sell - appreciate more than 20% over a 12- month period - depreciate up to 10% over a 12- month period - depreciate more than 10% over a 12- month period

Hold / Neutral - appreciate up to 20% over a 12- month period

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