McLeod Russel takes a breather after sharp rally

McLeod Russel India dropped 5.58% to Rs 290.40 at 14:11 IST on profit booking after a recent sharp rally
The stock hit a high of Rs 309 and a low of Rs 288.10 so far during the day. The stock had hit a 52-week high of Rs 311.50 on Thursday, 7 January 2010. The stock hit a 52-week low of Rs 42.05 on 25 February 2009.
The McLeod Russel India scrip has been on a roll recently. It advanced 17.02% in four trading days from Rs 261.65 on 31 December 2009 to Rs 306.20 on Thursday, 7 January 2010. The rally in the counter was triggered by hopes of firm tea prices after a report suggested that global tea shortage may widen this year and extend into 2011 as a rebound in production in Africa, Sri Lanka and India trails demand growth.
The mid-cap tea plantation company has an equity capital of Rs 54.73 crore. Face value per share is Rs 5.
The current price of Rs 290.40 discounts the company's Q2 September 2009, annualised EPS of Rs 70.23, by a PE multiple of 4.13
A recent report on the tea industry showed that the global deficit may reach as much as 130 million kilograms by April 2010, compared with the 110 million kilograms forecast in September 2009, and prices may rise to a record again this year as shortages persist.
Tea prices are likely to rule firm as the dry weather in top tea producing countries viz. Kenya, Sri Lanka and India crimped output. India's output in the 10 months through 31 October 2009 dropped to 830.4 million kilograms from 832.5 million a year ago, according to the state-run Tea Board. Exports declined 12% to 150 million kilograms in the January-October 2009 period.
On the other hand consumption growth is likely in India, the Middle East, Pakistan, Egypt and mature markets like the United Kingdom and Ireland.
On 23 December 2009, McLeod Russel India said it will acquire for the first time tea estates in Africa through its UK-based subsidiary Borelli Tea Holdings (Borelli) UK. The transaction will be completed on 15 January 2010.
McLeod Russel India, said that Borelli has signed a share purchase agreement with James Finlay and James Finlay International Holdings, both of the UK, for acquisition of 100% of the share capital of Rwenzori Tea Investments (Rwenzori), Uganda, for a provisional consideration of $25 million. Rwenzori has six gardens and five factories spread over 3,300 hectares.
With this acquisition, McLeod's total production will rise to 96 million kg , up from 81 million kg. The exports too would rise to 49 million kg from 34 million kg.
McLeod Russel India's net profit rose 57.9% to Rs 192.19 crore on a 23.1% rise in sales to Rs 343.77 crore in Q2 September 2009 over Q2 September 2008.
Mcleod Russel India is the country's largest tea-producing company. It is engaged in cultivation, manufacture and sale of tea.
Promoters have pledged more than 1.19 crore shares representing 10.90% of the equity capital of the company. Total promoters shareholding in the company is 45.36% (as on 30 September 2009).