Pick of the week : Jay Shree Tea & Industries Limited

by khalid on 11/04/2011 · 0 comments

Brokerage house ICICI Direct has recommended Jay Shree Tea & Industries Limited as “Pick of the week”. The firm recommended “Accumulate” on the stock with the target price of Rs 190. The time frame for achieving the target is 3-6 months.

Current Market Price : Rs 173
Target Price : Rs 190
Time frame : 3-6 months
Potential upside : 10%
Stop loss : Rs 164

Jay Shree Tea & Industries Limited is the second largest producer of tea in India. The company would benefit from the synchronous rise in domestic and global tea prices. High priced Darjeeling Tea are going to drive earnings growth of the company and company is increasing its volume by acquisition strategy. In FY08, the volume was 18.2 mkg which gone to 23.4 mkg in FY10.

Valuation :-
At the CMP of Rs 173, the stock is trading at 6.9x and 5.6x its FY11E and FY12E EPS of Rs 24.8 and Rs 30.7, respectively. With tea production in India in 2011 expected to be ~980-1000 mkg and production in Kenya and Sri Lanka expected to decline by ~16%, we believe tea prices would remain firm, subsequently improving the company’s earnings. Hence, we have valued the stock at 6x its FY12E EPS to arrive at a target price of Rs 190.

Share’s Data :-
BSE Code : 509715
Mkt. Cap : Rs 390.92 Crores
Jay Shree Tea & Industries Ltd. share’s CMP is Rs 179.30 on 11th Apr 2011.

Stay tuned to BelltheBull Blog for more news on Jay Shree Tea & Industries Limited !

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