Recommendation From Packaged Foods Sectors
This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
LT FOODS
HEALTHY RECIPE FOR GROWTH
BSE Code: 532783
CMP: Rs.85
FV: Rs.1
BSE Volume: 118168
HERE IS WHY
Strong growth expected for Indian Basmati rice exports
Well-diversified product basket
International business expansion
LT Foods Ltd (LTFL) is a branded specialty foods company engaged in milling, processing and marketing of branded and non-branded Basmati rice and manufacturing of rice food products in the domestic and overseas markets. The company has a well-diversified product basket catering to consumers of all income groups. The company is present in segments like Basmati rice, specialty rice (non- Basmati) and other food products.
The company's flagship brand ‘Daawat' enjoys a 22 per cent market share in the branded rice market in India. It also has strong market share in North America, where it sells Basmati rice under the brand ‘Royal'. Currently, the company has access to 1,40,000 traditional retail outlets, 3,000 wholesalers and reaches 93 per cent of towns having population of over 2 lakhs. It also has strong network in modern trade.
According to ICRA, Indian Basmati rice exports are expected to post strong growth in FY2018 and FY2019 on the back of improved demand in the international market, especially from Iran, and transfer of higher paddy prices over the last two procurement seasons. This augurs well for the company.
During the 9MFY18, the contribution of branded revenues to overall revenues has increased from 56 to 61 per cent. The company will invest US $20 million for branding and expansion in Europe, as it eyes a six-fold increase in sales from the branded segment over the next four years. Also, recently, LTFL launched the new avatar of leading brand Daawat and quick cook brown rice, which is expected to attract demand and generate volumes.
On the financial front, the company posted a 1.94 per cent hike in its net sales to Rs.552.40 crore in Q3FY18 as compared to Rs.541.87 crore in the same quarter last year. The company 's PBDT increased 37.15 per cent to Rs.24.51 crore in Q3FY18 as compared to Rs.17.87 crore in the same quarter last year. The company's net profit rose by 77.89 per cent to Rs.13.91 crore in the December quarter of FY18 as compared to Rs.7.82 crore in the same quarter last year.
On an annual basis, the company recorded an increase of 14.01 per cent in revenue to Rs.2,076.37 crore in FY17 as compared to Rs.1,821.20 crore in FY16. The company's PBIDT increased by 6.32 per cent to Rs.147.20 crore in the FY17 as compared to Rs.138.45 crore in the previous financial year. However, the net profit of the company declined by 0.79 per cent to Rs.30.14 crore in FY17 as compared to Rs.30.38 crore in FY16.
On the valuation front, the company's TTM PE stood at 65.99x, while the industry PE was 48.99x. The company's peers including Heritage Foods and Jubilant Foodworks recorded a TTM PE of 72.24x and 106.57x, respectively. The company's return on equity (RoE) and return on capital employed (RoCE) stood at 19.69 per cent and 15.40 per cent, respectively. In the last one year, its debt-equity ratio improved from 2.51 to 1.26 and the current ratio from 1.08 to 1.30. We recommend a BUY on the stock.
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