Mcleod Russel: SKP Securities’ Research Report

In FY11, Mcleod Russel’s cost per kg has increased by Rs. 11 per kg to Rs 107 per kg owing to loss in production of 2 mn. kgs of tea due to bad weather. As most of Mcleod Russel’s cost is fix in nature, subsequent recovery of production of own tea in FY12 will reduce the cost per kg for the company. Mcleod Russel‘s stock is currently trading at a PE of 9.15x FY12E and 7.86x FY13E EPS. We recommend BUY rating on the Mcleod Russel stock with a 15 months target price of Rs 329, at 10x FY13E earnings, giving it an upside of 27% from the current levels