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Ravalgaon-Sweet profits

Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Microcaps-When will value.be unlocked?
Forum Discription: Micro cap companies waiting for value unlocking. This is for the patient long term investor These companies are neglected by the markets and are waiting for a catalyst.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1985
Printed Date: 17/Apr/2025 at 11:21am


Topic: Ravalgaon-Sweet profits
Posted By: jstk
Subject: Ravalgaon-Sweet profits
Date Posted: 18/Dec/2008 at 11:58am

The Ravalgaon Sugar Farm Ltd ( BSE Code: 507300) is in its 75th year of operations.

 

Business segments: confectionery & sugar

 

Equity: 0.34 crores (68,000 shares of Face value of Rs.50 each)

 

Long term loan: 24 crores

 

Market price: Rs.4200

 

Market cap: Rs.28.56 crores

 

Year ended March 31, 2008:

 

Revenue : Rs.75.77 cr

NP: Rs.1.57 cr (after paying Rs.1.57 cr in tax)

EPS: Rs.247

Dividend per share: 100% (Rs.50 per share)

 

Of the above revenue, Confectionery business has achieved sales of Rs.19.56 cr & Segment profit of Rs.5.24 cr

 

Half year ended Sept 08:

 

Revenue: Rs.48.30 cr

NP: Rs.3.09 cr (tax paid: Rs.1.67 cr)

 

Of the above revenue, Confectionery business has achieved sales of Rs.10.87 cr & Segment profit of Rs.4.89 cr.

 

Ravalagon has strong well entrenched confectionery brands like Pan Pasand, Mango Mood, Coffee Break, Choco cream besides the all time favorites cherries  /sweet centre candy( strawberry, orange, lime flavours ), Supreme (cardamom, rose & butterscotch).

The confectionery division has been operational since 1942 and has a strong pan India presence.

 

Acquisitions in the confectionery business over the past few years:

2 years back Godrej/Hersheys had acquired Nutrine for around Rs.270 crores while around 4 years back Lotte bought 60% in Parry’s for Rs. 65 crores valuing the company at Rs.108 cr.It is important to note that Parrys was making loss/negligible profit when it was acquired by Lotte.

 

Around a year back there was speculation that ITC will acquire Ravalgaon’s confectionery division for Rs.350 cr.

 

To me, this valuation seems absolutely unlikely but it will be wrong to turn a blind eye to the fact Ravalgaon with its strong & profitable confectionery  brands re-presents a delicious opportunity for takeover candidates. A back of the envelope calculation makes a price of Rs.100 crore plus /minus 15% very probable.which translates into around Rs.14500- 15000 per share.

 

At the current price Ravalgaon is available at a Market cap of under Rs.30 crores and clearly appears an excellent investment opportunity.

 

(Disclosure: I ‘m invested in Ravalgaon).

 



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If you buy for a non-value reason, you will end up selling for a non-value reason.


Replies:
Posted By: msjala
Date Posted: 05/Jan/2009 at 7:36pm
Dear JSTK Sir,

Many thanks for pointing up Ravalgaon Sugar.
I had entered this in 2007 around 8000 levels.
I waited..., but fear got the better part of me & I sold when it touched sub 5000 levels.

Best part about this company is yes, as you have pointed out, their chocolate brands. They are well penetrated across India.

There were days, when the stock gyrated at 20% in a day either ways.
However, this stock is for the patient investors, till some other company buys this.

Thanks,
MSJ- ala



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Thanks,
Jala.

Posted By: kanaka_basi
Date Posted: 13/Feb/2009 at 1:27am
Hi JSTK,
 
Do you think that Ravalgaon is a good bet even now? for buy and hold purposes? What happened to the ITC's takeover rumor? How is their management quality? corp governance etc??
 
How much quantity of these high priced stocks should one buy?
 
Would like your opinion about them...
 
Thanks
Srini

Posted By: jstk
Date Posted: 16/Feb/2009 at 6:29pm
i beleive Ravalagoan is an excellent investment.No news on the ITC rumour,must have been just a rumour.
 
Ravalagon management is conservative but not extraordinary. For me the reasons to buy are:
 
1) Strong well entrenched candy Brands in the mass market. To my mind, candy demand with a single unit retailing @ 50 paise price point is more or less not going to get affected by an economic slowdown.
 
2) Pan India presence excellent distribution network.
 
3) less than 30 cr m/cap
 
it is a Rs.50 paid up share with just 68,000 shares.
 
How much quantity to buy is an individual decsion and so i would not be able to offer any views.
 
discl: i'm invested in the company and have a substantial position
 
 
 
 


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If you buy for a non-value reason, you will end up selling for a non-value reason.

Posted By: kanaka_basi
Date Posted: 16/Feb/2009 at 7:09pm
Originally posted by jstk

 
Ravalagon management is conservative but not extraordinary. For me the reasons to buy are:
 
1) Strong well entrenched candy Brands in the mass market. To my mind, candy demand with a single unit retailing @ 50 paise price point is more or less not going to get affected by an economic slowdown.
 
2) Pan India presence excellent distribution network.
 
3) less than 30 cr m/cap
 
it is a Rs.50 paid up share with just 68,000 shares.
 
How much quantity to buy is an individual decsion and so i would not be able to offer any views.
 
discl: i'm invested in the company and have a substantial position
 
 
 
Aren't they the only confectionery company making hard boiled candies and hence the low price of 50 ps per candy?
 
How does the lower market cap and lesser number of equity shares in circulation help?? More demand, hence more chance of price rise??
 
 
Thanks

Posted By: kannanravi1
Date Posted: 30/Mar/2009 at 10:51pm
Hi Jstk,
     They don't seem to be making consistent profits...which may be ok in some economy based segments, but in a segment like candy it worries me. What causes such huge fluctuations in their business? Any clue?


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kannan

Posted By: jstk
Date Posted: 31/Mar/2009 at 12:43pm
Ravi,
 
Ravalgaon operates in the Candy & Sugar segments. Fluctuations ( for the company as a whole) come from the vagaries of the sugar business. Candy opeartions have always been stable and profitable with operating margins of around 25-30%
 
For example in 07-08, Sugar business lost 1.74 cr on a turnover of around 50 cr while Candy opeartions earned 5.25 cr on a turnover of 19.5 cr.
 
similarly this year for the 9-months ended dec 08, sugar business earned a profit of 6.42 cr on revenue of 61.45 cr while Candy earned 5.8 cr on  revenue of 16.8 cr.
 
i do hope this addresses your Q, pls let me know in case you need any other clarifications.


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If you buy for a non-value reason, you will end up selling for a non-value reason.

Posted By: kannanravi1
Date Posted: 31/Mar/2009 at 11:34pm
Originally posted by jstk

Ravi,
 
Ravalgaon operates in the Candy & Sugar segments. Fluctuations ( for the company as a whole) come from the vagaries of the sugar business. Candy opeartions have always been stable and profitable with operating margins of around 25-30%
 
For example in 07-08, Sugar business lost 1.74 cr on a turnover of around 50 cr while Candy opeartions earned 5.25 cr on a turnover of 19.5 cr.
 
similarly this year for the 9-months ended dec 08, sugar business earned a profit of 6.42 cr on revenue of 61.45 cr while Candy earned 5.8 cr on  revenue of 16.8 cr.
 
i do hope this addresses your Q, pls let me know in case you need any other clarifications.


Thanks much for the very clean explanation. Hopefully they have some plans in near future to hive off the sugar business...that would be very important for value unlocking


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kannan

Posted By: Kautilya
Date Posted: 15/Aug/2010 at 6:53pm
This looks just the kind of company I wanted to study. Would have never discovered this, if not for the spamming :)

Company has some great brands like Coffee Break. It is also involved in sugar business, but looking at their June 2010 results revenues from Sugar have come down a lot, as if the management wants to focus only on confectionery business. Last two quarter have been loss making, but we take this as the management focussing on confectionery business and doing away with the sugar business then it looks like a great prospect. Request comments from boarders who have been tracking this.


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