LT Foods Research Report By Angel Broking

For 4QFY2018, LT Foods Ltd (LTFL) posted results in-line with our expectations on the top-line front. However it disappointed on the bottom-line front. Revenue grew by ~15% yoy to Rs 1,071cr, driven by healthy growth in domestic as well as international businesses.

On the operating front, margins contracted by 102bps yoy on account of investment on expansion of international operations in Europe & US and currency fluctuation. On the bottom-line front, PAT de-grew by ~8% ypy to Rs 35cr on account of poor operating margin and higher depreciation cost.

Healthy revenue growth in domestic and international businesses aided top-line:

The company’s top-line grew by ~15% yoy to `1,071cr on the back of strong domestic growth (up by ~9%) and international growth (up by ~31%). During FY18, share of branded revenues to overall revenues has increased from 64% to 69%. Moreover during FY18, LTFL has launched the new avatar of leading brand “Daawat” and quick cook brown rice. These new initiatives are expected to give a new look and feel to the brand, along with more information to the consumer.

Profitabilty tepid due to poor operating margins and higher depreciation cost:

On the operating front, margins contracted by 100bps yoy on account of investment on expansion of international operations in Europe & US and currency fluctuation. On the bottom-line front, PAT de-grew by ~8% to `35cr on an account of poor operating margin and higher depreciation cost.

Outlook and Valuation:

Going forward, we expect the company to report healthy top-line CAGR of 12% over the next two years on the back of strong distribution network & brand, continuing expansion, wide product basket and addition of new products in portfolio.

On the bottom-line front, we expect ~17% CAGR following robust improvement in operating performance over the next two years. We expect margin expansion from better manufacturing efficiency, increase in scale and change in product mix.

At the current market price of Rs76, the stock trades at a PE of 15.8x and 12.6x its FY2019E and FY2020E EPS of Rs 4.9 and Rs 6.1 respectively. We recommend BUY with target price of Rs 128.