Tara Health Foods - Review

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Unicon has a SUBSCRIBE recommendation on the IPO of Tara Health Foods,

At the upper price band of INR 190, the company is priced at 12x it’s FY10 annualised EPS of INR 16 on a post issue basis. However, added capacities with better capacity utilisation will catalyse THFL’s strong growth in revenues and margins. Considering the growth opportunity that THFL presents, we recommend SUBSCRIBE to the issue for long term investment gains.

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K R Choksey Analysts Shailesh K and Dhawal.K has a SUBSCRIBE recommendation on the IPO,

Sales has grown at 130% CAGR over last four years and is expected to maintain high growth over next 3 years. OPM has consistently improved in the last four years. NPM is also better than peers. At the upper price band of Rs 190 company is available at a P/E of 11.8x FY10E Diluted EPS of RS 16.11 which looks quite attractive. We advice investors to subscribe to the issue.

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Dalal & Brocha has NEUTRAL View on the IPO,

The company has filed for patent of its unique blend of refined rice bran oil and olive oil sold under the brand Zaitoon Tara. This oil is 0% in trans-fatty acids and helps in lowering the cholesterol and enhancing the immune system for the human body.

The two promoter group companies, Tara Feed Factory and Tara Heart Care Products and one associate company, Tara Life Care Products are in similar lines of business.

The company had negative operating cash flows of Rs 18.32 crores for the nine month ended December 2009, Rs 30.86 crore in FY 2009 and Rs 19.12 crore in FY 2008.

The annualised EPS for the year 2009 – 10 is estimated to be Rs 16.11 on a post issue basis and the P/E multiple would be at 11.17x (at lower price band of Rs 180) and at 11.79x (at the higher price band of Rs 190).

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Mehta Group / MSearch Analyst Prashatn Tapse has a AVOID recommendation on the IPO,

Investors can refrain from subscribing to the initial public offer of Tara Health Foods Ltd which is into business of manufacturing edible oils products and cattle feed products. This segment is purely a very highly competitive business & current scenario doesn’t provide growth visibility in the solvent market for Tara against the other branded players. Absence of long-term customer contracts & Low brand awareness are reasons that dim the prospects of this offer. The company does not possess any unique aspect that sets it apart from its listed peers & hence, we recommend investors to “AVOID” the issue.

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SMC Analysts Shilpi Agarwal and KamlaDevi have NEUTRAL View with the following Note,

Considering the P/E valuation, the company is trading at pre issue P/E of 7.5x on the lower side of the band and 7.9x on the higher side of the band of its annualised FY10 EPS of Rs.24.14.Looking at the post issue valuation,the company is trading at P/E of 11.2 times on the lower side and 11.8 times on the higher side of its post issue annualised FY10 EPS of Rs.16.11.At its P/B ratio it trades at 3.8 and 4.1 multiples of the lower and higher band of its pre issue book value of Rs.47.34 and 1.9x and 2x on the lower and higher side of its post issue book value of Rs.94.82 respectively.

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Monarch REsearch asks investors to SUBSCRIBE - LONG TERM,

Tara Health Foods is looking very strong fundamentally. The cumulative growth for the top-line and bottom-line is very healthy and seems to be healthy in the coming year. The EPS of the stock for FY09 is 18.84 and for 9 months ended December 2009 is 40.23, while the post issue EPS for the 9 months ended December 2009 is 12.08. Company has set a price band of Rs 180 on the lower bound and Rs 190 for the upper bound per equity share of Rs 10 face value. The PE for the lower band is 14.90 & 15.73 for the upper bound.

Compare to the company’s peer group viz. Agro tech foods, Anik industry & Murli industries, the Tara health food valuation seems to be relatively cheap. However, looking to its expan-sion plan and expectation about completion of all the task in FY11-12, we recommend to in-vest in this stock for long term investment horizon.