Karuturi Gloabl : Investors Stock Pick

 

Karuturi Global is the world's largest producer of roses, cultivating 685 million stems per annum.It has over a decade of experience in rose cultivation with operations in Ethiopia, Kenya and India. Ramakrishna Karuturi, chairman and MDof floriculture firm Karuturi Global This business graduate from Ohio knew little about Africa and even less about rose cultivation before 1995, when, looking for roses for his wife on Valentine’s Day, he found that the flowers were in short supply in Bangalore.

 

Karuturi then decided to grow roses in India, starting with a small farm in nearby Dodaballarpur.He went on to become the world’s largest rose producer after acquiring Ethiopia’s Sher Agencies last year for $68 million (Rs 272 crore), taking his annual production from 150 million to 685 million stems.

Karuturi now has 325 hectares under cultivation, of which 100 are in Ethiopia, 185 in Kenya and 40 in India. The output in Ethiopia has grown by 100 per cent since the acquisition, and by December 2009, Karuturi Global will have 300 hectares in the country, making it thrice as big as the second-largest rose producer.

The growth of an organised retail industry in the country is currently in a nascent stage of development and that will lead to a robust growth for cut-rose producers.The global supply-demand mismatch is considered to be positive for rose producers. Rise in per capita income and strong demand during festivals and Valentine's Day are fuelling huge flower consumption in India.

 

The Indian floriculture sector is expected to grow by 40% each year (significantly higher than the global average) and almost 85% of the demand is estimated to be from roses.All these factors are expected to catapult karuturi in the top league.The revenues are expected to clock a 38 per cent CAGR over FY08-FY10 to Rs 770 crore with operating profit CAGR of 40 per cent to Rs 280 crore and a profit after tax CAGR of 52 per cent to Rs 240 crore.At present price of 23 the company is quoting at less than 6 times its fy10 earnings.Considering the huge potential of the company,karuturi is a must have.