Analysts' Picks: Mcleod Russel
MCLEOD RUSSEL
CMP: RS 88.35
TARGET PRICE: RS 120
MERRILL Lynch has reiterated its ���buy��� rating on Mcleod Russel while upgrading its 2008-09 earnings target by 9% to factor in higher tea prices.
���We are now building in an 18% Y-o-Y rise in tea prices in FY09 (Rs106/kg) against our earlier estimate of a 15% rise (Rs 101). As per the management, the company has already entered into sale contracts at average Rs110/kg for roughly half of the annual sales volumes,��� the investment bank said in a client note.
���We believe tea prices are on an upward run and McLeod offers an excellent leverage, given its scale and high fixed operating costs. We forecast tea prices to rise 24% over the next two years. This, we estimate, will lead to McLeod���s EPS growing five times over the same period,��� Merrill added.
CMP: RS 88.35
TARGET PRICE: RS 120
MERRILL Lynch has reiterated its ���buy��� rating on Mcleod Russel while upgrading its 2008-09 earnings target by 9% to factor in higher tea prices.
���We are now building in an 18% Y-o-Y rise in tea prices in FY09 (Rs106/kg) against our earlier estimate of a 15% rise (Rs 101). As per the management, the company has already entered into sale contracts at average Rs110/kg for roughly half of the annual sales volumes,��� the investment bank said in a client note.
���We believe tea prices are on an upward run and McLeod offers an excellent leverage, given its scale and high fixed operating costs. We forecast tea prices to rise 24% over the next two years. This, we estimate, will lead to McLeod���s EPS growing five times over the same period,��� Merrill added.
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