Recommendation from Food Processing Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

[EasyDNNnews:PaidContentStart]

LT FOODS LTD. : MARKING A GLOBAL PRESENCE

HERE IS WHY
✓Leadership position in the Basmati rice market
✓Steady financial growth
✓Strategic expansion plans in place

LT Foods is a leading rice-based food company with strong global brands of Basmati and other specialty rice, organic foods and rice-based convenience products. The company’s integrated operations cover a global footprint with procurement, milling and processing for Basmati rice centred in India whereas further value-addition, marketing and distribution resources available worldwide. The key markets for LT Foods’ brands besides India cover the US, the UK, Europe, the Middle East, Far East, and many other countries. The rice portfolio comprises brown, white, steamed, parboiled, organic, quick- cooking brown rice, and value-added and flavoured rice.

Its flagship brands include ‘Daawat’ and ‘Royal’ which carry a strong market share in Basmati rice market of 27 per cent and 50 per cent in India and the US, respectively. The company hasn’t yet announced Q4 and FY22 results. For FY21 the consolidated revenues stood at ₹ 4,686 crore compared to ₹ 4,173 crore in FY20 which witnessed a growth of 12.3 per cent. Due to significant alterations in product mix and lower input costs, the gross margin increased 232 basis points to 31.1 per cent.

The EBITDA grew by 17.55 per cent to ₹ 598 crore. Due to the company’s focus on cost control and working capital efficiency, the EBITDA margin expanded by 58 basis points year-on-year (YoY), from 12.2 per cent to 12.8 per cent.

The PAT too improved by 44.5 per cent to ₹ 293.4 crore. For the latest quarter ended December 2021, revenue grew by 21.26 per cent YoY to ₹ 1,368.22 crore from ₹ 1,128.35 crore in Q3FY21. On a sequential basis, the top-line was up by 3.67 per cent. Revenue growth was driven by brand investments and distribution expansion. PBIDT excluding other income was reported at ₹ 150.55 crore, up by 9.9 per cent as compared to the year-ago period and the corresponding margin was reported at 11 per cent, contracting by 114 basis points YoY. PAT was reported at ₹ 78.19 crore, up by 11.88 per cent from ₹ 69.89 crore in the same quarter for the previous fiscal year.

The PAT margin stood at 5.71 per cent in Q3FY22, contracting from 6.19 per cent in Q3FY21. On the liquidity front, the rice-maker has generated significant free cash flows amounting to ₹ 159 crore, driven by strong performance in 9MFY22 that led to decline in overall debt by ₹ 198 crore on YoY basis to ₹ 1,225 crore and consequently an improved debt-equity ratio from 0.78 to 0.59 times. This further led to a reduction in the finance cost by 27 per cent and the overall fund cost was down from 5.3 per cent to 4.3 per cent. The ROE stood at 18.13 per cent and the ROCE was at 16.3 per cent.

The management is focused on innovation, distribution network and strong branding campaigns to drive growth in the future. One such strategic decision was to acquire a popular rice brand called ‘Golden Star’ which is based in the US. It is famous in the jasmine rice market. This is yet another step towards the Daawat brand expanding its presence and strengthening operations in North America. The company has a well-established distribution network with global supply chain hubs supported by state-of-the-art processing units which are strategically located. By the virtue of all these factors, we recommend our reader-investors to BUY this stock.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]