The reasons to suggest Jayashree Tea are as follows:

The company owns six estates in Darjeeling, which is known for its superlative quality of orthodox tea. Darjeeling tea is mainly exported to Russian and Middle East countries. In 2010, average realisations of Darjeeling tea were 285 per kg as compared to120 per kg for black tea. With the robust demand for high quality tea in international markets, prices in the current year are expected to reign higher by further Rs 15-20 per kg. Hence, backed by higher realisations and increasing exports of the company (Rs 486 million in FY08 and s 900 million in FY10), we believe Jayshree`s revenues would continue to grow at 12% CAGR from FY11-13E. The EPS is expected to grow at 9% CAGR in FY11-13E.

At the current market price (CMP) the stock is trading at 6.9x and 5.6x its FY11E and FY12E EPS of Rs 24.8 and Rs 30.7, respectively. With tea production in India in 2011 expected to be 980-1000 mkg and production in Kenya and Sri Lanka expected to decline by 16%, we believe tea prices would remain firm, subsequently improving the company`s earnings. Hence, we have valued the stock at 6x its FY12E earning per share (EPS) to arrive at a target price of Rs 190.