Karuturi Networks is a Bangalore based Floriculture company and is an emerging leader in the global rose industry. It has 10 hectares of land in Bangalore and another 50 hectares in Ethiopia where it has made a major acquisition of land under rose cultivation. It supplies roses to some of the biggest retailers in the world like ASDA (a Walmart company). Karuturi has also expanded into the fast growing food processing sector with export of gherkins used to make pickles and for salads.
Karuturi Networks Ltd.
Company Profile
Karuturi Networks Ltd. (KNL) is a Bangalore based Floriculture company and is an emerging leader in the global rose industry. It has 10 hectares of land in Bangalore and another 50 hectares in Ethiopia where it has made a major acquisition of land under rose cultivation. It supplies roses to some of the biggest retailers in the world like ASDA (a Walmart company). Karuturi has also expanded into the fast growing food processing sector with export of gherkins used to make pickles and for salads.
Recent Developments:
1) Sher Acquisition
KNL has recently acquired the Dutch company, Sher Agencies. With this acquisition, KNL has emerged as the world’s largest producer and exporter of roses. Karuturi Roses are available in Africa, USA. Europe, Middle East, Far East Asia, Australia and New Zealand. This makes Karuturi a truly international, fully integrated Indian MNC in the field of agriculture. After the takeover, the company's top line is expected to bloom from Rs 100 crore to Rs 400 crore. Karuturi's rose-producing capacity will also grow from about 150 million stems to around 650 million.
2) Expansion in Ethiopia
KNL already has 50 hectares of rose fields in Ethiopia and has been allotted additional 450 hectares of land for its expansion by The Government of Ethiopia. This land bank holds tremendous prospects, as the rate of production of stems in Ethiopia is around 1 million per hectare. This essentially means a quadrupling of production even by a conservative estimate. Ethiopia is an ideal location for rose cultivation because of its climatic and soil conditions, cheap labour and better access to EU.
3) Diversification into food processing
After its success in floriculture, KNL has diversified into cultivation and export of gherkins. It now exports to major European markets and Japan.
4) Investment by George Soros and other foreign investors
George Soros backed Quantum Fund has picked up a 4.6% stake sale in KNL recently. Some of the funds previous stock picks include GMR Infrastructure and Unitech. Other prominent investors include Citigroup, Lehman Brothers and Credit Suisse (Singapore).
Concerns:
KNL’s revenues come substantially from a single sector namely floriculture. Related to this is the concern that adverse climatic factors may have repercussions on production and turnover. To protect itself against this, KNL has diversified into food processing and has also acquired lot of capacity in Ethiopia.
Financial Position & Valuations:
On the basis of the consolidation of its wholly owned subsidiary in Ethiopia, Karuturi achieved turnover of Rs 101.3 crores during the financial year ended 31st March 2007. This resulted in a Net Profit of Rs 39.26 crores. The sales and net profits thus showed a growth of 134% and 182% respectively over 2005-06. In the current financial year 2007-08, for the first half, KNL has reported a consolidated turnover of Rs 85.40 crores (an increase of 147%) and a net profit of Rs 28.14 crores (an increase of 117%). This is impressive by any standards and should go up even more once the additional land under rose cultivation in Ethiopia kicks in from early next year.
Valuation:
The share has an annualized EPS of 21.6 for 2007-08 which works out to a P/E of 10.8. This is very low compared to the Sales and Profit growth. We strongly recommend the stock as an excellent play in one of India’s sunrise industries with the price target of Rs 400 in twelve months.
(Disclaimer : The author has holdings in his proprietory account and in some aggressive portfolios under the PMS service)
Karuturi Networks Ltd.
Company Profile
Karuturi Networks Ltd. (KNL) is a Bangalore based Floriculture company and is an emerging leader in the global rose industry. It has 10 hectares of land in Bangalore and another 50 hectares in Ethiopia where it has made a major acquisition of land under rose cultivation. It supplies roses to some of the biggest retailers in the world like ASDA (a Walmart company). Karuturi has also expanded into the fast growing food processing sector with export of gherkins used to make pickles and for salads.
Recent Developments:
1) Sher Acquisition
KNL has recently acquired the Dutch company, Sher Agencies. With this acquisition, KNL has emerged as the world’s largest producer and exporter of roses. Karuturi Roses are available in Africa, USA. Europe, Middle East, Far East Asia, Australia and New Zealand. This makes Karuturi a truly international, fully integrated Indian MNC in the field of agriculture. After the takeover, the company's top line is expected to bloom from Rs 100 crore to Rs 400 crore. Karuturi's rose-producing capacity will also grow from about 150 million stems to around 650 million.
2) Expansion in Ethiopia
KNL already has 50 hectares of rose fields in Ethiopia and has been allotted additional 450 hectares of land for its expansion by The Government of Ethiopia. This land bank holds tremendous prospects, as the rate of production of stems in Ethiopia is around 1 million per hectare. This essentially means a quadrupling of production even by a conservative estimate. Ethiopia is an ideal location for rose cultivation because of its climatic and soil conditions, cheap labour and better access to EU.
3) Diversification into food processing
After its success in floriculture, KNL has diversified into cultivation and export of gherkins. It now exports to major European markets and Japan.
4) Investment by George Soros and other foreign investors
George Soros backed Quantum Fund has picked up a 4.6% stake sale in KNL recently. Some of the funds previous stock picks include GMR Infrastructure and Unitech. Other prominent investors include Citigroup, Lehman Brothers and Credit Suisse (Singapore).
Concerns:
KNL’s revenues come substantially from a single sector namely floriculture. Related to this is the concern that adverse climatic factors may have repercussions on production and turnover. To protect itself against this, KNL has diversified into food processing and has also acquired lot of capacity in Ethiopia.
Financial Position & Valuations:
On the basis of the consolidation of its wholly owned subsidiary in Ethiopia, Karuturi achieved turnover of Rs 101.3 crores during the financial year ended 31st March 2007. This resulted in a Net Profit of Rs 39.26 crores. The sales and net profits thus showed a growth of 134% and 182% respectively over 2005-06. In the current financial year 2007-08, for the first half, KNL has reported a consolidated turnover of Rs 85.40 crores (an increase of 147%) and a net profit of Rs 28.14 crores (an increase of 117%). This is impressive by any standards and should go up even more once the additional land under rose cultivation in Ethiopia kicks in from early next year.
Valuation:
The share has an annualized EPS of 21.6 for 2007-08 which works out to a P/E of 10.8. This is very low compared to the Sales and Profit growth. We strongly recommend the stock as an excellent play in one of India’s sunrise industries with the price target of Rs 400 in twelve months.
(Disclaimer : The author has holdings in his proprietory account and in some aggressive portfolios under the PMS service)
