COMPANY OVERVIEW:
REI Agro was established in the 1994 by Mr.Sanjay Jhunjhunwala and Mr.Sandip Jhunjhunwala. Today REI Agro is the leading food major. Company operates state of the art rice processing units. It offers wide range of brands like Kasauti, Real Magic, Mehrab, Mr.Miller, Hungama, Hansraj and Nausheen. The wide range of choices in various price band helps in catering to different types of customers and hence benefiting the company.
There is huge demand for parboiled rice in the Gulf region and this will be the major driving force behind company’s export in the coming times. Company has the right technology and appropriate funds to capitalize on this segment.
REI focus on basmati rice, raw and par boiled. The revenue of the company is almost twice that of the closest competitor.

Distribution Network:
It has strong pan India presence through 490 dealers and 100,000 retail outlets in the domestic market. It also has strong presence in UAE and Saudi Arabia through dealers.

Manufacturing Units:
It has processing units in Bawal (Haryana) and leased unit in Punjab. Both of the units are located in the heart of Basmati belt.

Retail Foray:
In 2008, the retail venture was demerged in a separate company named REI Six Ten Retail (RSTRL) that has 310 outlets mainly in northern and western India. REI Agro holds nearly 24.4% stake in this company, which had posted a net profit of Rs 26.4 crore in FY 10 and has a market capitalization of around Rs 780 crore.

INVESTMENT RATIONAL:
Company has 24.4% stake in REI Six Ten worth around Rs 200 crore.
It is fully integrated rice company paddy purchase to marketing.
Strong dealer network across the country and in Middle East.
Company matures rice up to 14 months to get better quality rice and realization. The inventory rose at 55% annually and has had huge pressure on cash flow. But now company has sufficient inventory it will further rise or build up not expected will increase the cash flow going further.
REI has forayed into wind power and in FY10 wind power contributed around 1% of the total revenue. This business is also expected to see higher share in total revenue.
After the flood in Pakistan, India is expected to capture the world Basmati rice market.
The supply constraint will see rice prices going up further are going to increase the margin.

RISK:
As company earns significant portion of revenue from exports, any strong appreciation of rupee will dent the net profit.
Slow down in the Global economy will dent the demand of premium rice.
And decline in Rice price.

	NO. OF SHARE	% OF TOTAL
PROMOTERS	120977829	37.46%
INSTITUTION	78210704	25.39%
GENERAL PUBLIC	120139785	37.150%
GRAND TOTAL	319328318	100.00%

	31/03/07	31/03/08	31/03/09	31/03/10
TOTAL INCOME	1085.34	1857.45	2452.09	3702.93
EXPENDITURE	-886.49	-1529.18	-2002.65	-3091.46
PBDITA	198.85	328.27	449.44	611.47
DEPRECIATION	-15.56	-20.68	-21.29	-21.39
PBIT	183.29	307.59	428.15	590.08
INTEREST	-77.24	-177.41	-332.83	-348.25
PBT	106.05	130.18	95.32	241.83
TAX	-14.96	-21.07	-34.39	-84.66
PAT	91.09	109.11	60.93	157.17
*Extra Ordinary Item is excluded from the calculation.

Key Highlights:
Total Income grew at CAGR of 49.9% to Rs 370.2 crore in FY10 in last four years.
PBDITA grew at CAGR of 45.2% to Rs 61.1 crore in FY10 in last four years.
PAT grew at CAGR of 20.5% to Rs 15.8 crore in FY10 in last four years.

	31/03/07	31/03/08	31/03/09	31/03/10
EPS	2.85255002	3.41686	1.90806755	4.921894
PBDITA MARGIN	18.3214477	17.67315	18.3288542	16.51314
NPM	8.39276172	5.874182	2.48481907	4.244477
INTEREST COVER	2.37299327	1.733781	1.28639245	1.694415

Key Highlights:
EPS has grown at CAGR of 20.5% in the last four years to Rs 4.9 in FY10.
PBDITA Margin declined from 18.3% in FY07 to 16.5% in FY10. The decline in the margin is due to the increase in the input cost.
NPM decline from 8.39% in FY07 to 4.24% in FY10.
Interest cover has declined from 2.37 in FY07 to 1.69 in FY10. The decline in interest cover is due to the debt taken for the expansion plan.

	Q2FY10	% CHANGE	Q2FY11
TOTAL INCOME	972.04	-13.82453397	837.66
EXPENDITURE	-807.61		-673.75
PBDITA	164.43	-0.316243994	163.91
DEPRECIATION	-5.37		-5.58
PBIT	159.06		158.33
INTEREST	-83.4		-53.76
PBT	75.66		104.57
TAX	-26.75		-34.39
PAT	48.91	43.48803926	70.18

Key Highlights:
Total Income declined by -13.82% to Rs 837.66 crore in Q2FY11.
PBDITA declined by -0.31% to Rs 163.91 crore in Q2FY11.
PAT moved up by 43.5% to Rs 70.18 crore in Q2FY11.

VALUATION &OUTLOOK:
At current market price of Rs 26.15, stock is trading at 5X to FY11E EPS. We value the company at 9X on conservative basis. The fair value we arrive at is Rs 40.50.
The outlook of the company and Rice industry remains buoyant. We expect capacity addition and lowering of the debt will further increase the profitability.

CONCLUSION:
Investors could take position in the stock. Buying on dips is suggested as the market risk is high. Investors with investment time frame of 8-10 months could take position on the counters.