4QFY2018 Result Update | Media
May 28, 2018
LT Foods
BUY
CMP
`76
Performance Update
Target Price
`128
(` cr)
4QFY18
4QFY17
% yoy
3QFY18
% qoq
Investment Period
12 Months
Revenue
1,071
927
15.4
941
13.8
Sector
Food Processing
EBITDA
96
93
3.7
86
12.0
Market Cap (` cr)
2,454
Net Debt (` cr)
1,516
OPM (%)
9.0
10.0
(102)
9.1
(14)
Beta
1.0
A djusted PAT
35
38
(8.8)
39
(10.3)
52 Week High / Low
109/56
Avg. Daily Volume
30,429
Source: Company, Angel Research
Face Value (`)
1
BSE Sensex
35,134
For 4QFY2018, LT Foods Ltd (LTFL) posted results in-line with our expectations on
Nifty
10,675
Reuters Code
LTOL.BO
the top-line front. However it disappointed on the bottom-line front. Revenue grew
Bloomberg Code
LTFO.IN
by ~15% yoy to `1,071cr, driven by healthy growth in domestic as well as
Shareholding Pattern (%)
international businesses. On the operating front, margins contracted by 102bps
Promoters
56.0
MF / Banks / Indian Fls
17.7
yoy on account of investment on expansion of international operations in Europe
FII / NRIs / OCBs
0.0
& US and currency fluctuation. On the bottom-line front, PAT de-grew by ~8%
Indian Public / Others
26.3
ypy to `35cr on account of poor operating margin and higher depreciation cost.
Abs.(%)
3m 1yr
3yr
Sensex
7.4
27.1
22.9
Healthy revenue growth in domestic and international businesses aided top-line:
LT Foods
(19.2)
2.7
442.0
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
3-year price chart
69%. Moreover during FY18, LTFL has launched the new avatar of leading brand
120
“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.
100
Profitabilty tepid due to poor operating margins and higher depreciation cost: On
80
the operating front, margins contracted by 100bps yoy on account of investment
60
on expansion of international operations in Europe & US and currency fluctuation.
40
On the bottom-line front, PAT de-grew by ~8% to `35cr on an account of poor
20
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
Source: Company, Angel Research
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 `76, the stock trades at a PE
of 15.8x and 12.6x its FY2019E and FY2020E EPS of `4.9 and `6.1 respectively.
We recommend BUY with target price of `128.
Key financials
Amarjeet S Maurya
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
022-39357800 Ext: 6831
Net Sales
3,287
3,614
4,047
4,533
% chg
10.5
10.0
12.0
12.0
Net Profit
117
144
156
196
% chg
18.9
23.0
8.0
25.8
OPM (%)
11.1
10.4
10.8
11.0
EPS (`)
3.7
4.5
4.9
6.1
P/E (x)
21.0
17.1
15.8
12.6
P/BV (x)
3.8
2.1
1.8
1.6
RoE (%)
17.9
12.0
11.5
12.6
RoCE (%)
13.8
12.0
12.7
13.7
EV/Sales (x)
1.2
1.1
1.0
0.9
EV/EBITDA (x)
11.0
10.5
9.1
8.0
Source: Company, Angel Research, Note: CMP as of May 28, 2018
Please refer to important disclosures at the end of this report
1
LT Foods | 4QFY2018 Result Update
Exhibit 1: 4QFY2018 Performance
Y/E March (` cr)
4QFY18
4QFY17
% yoy
3QFY18
% qoq
FY2018
FY2017
% chg
Net Sales
1,071
927
15.4
941
13.8
3613.7
3244.8
11.4
Consumption of RM
829.9
725.45
14.4
713.8
16.3
2671.4
2409.7
10.9
(% of Sales)
77.5
78.2
75.9
73.9
74.3
Staff Costs
39
35
10.2
34
13.6
135.0
116.9
15.5
(% of Sales)
3.6
3.8
3.6
3.7
3.6
Other Expenses
106
74
42.9
107
(1.1)
431.0
360.2
19.6
(% of Sales)
9.9
8.0
11.4
11.9
11.1
Total Expenditure
975
835
16.7
855
14.0
3,237
2,887
12.1
Operating Profit
96
93
3.7
86
12.0
376
358
5.1
OPM
9.0
10.0
9.1
10.4
11.0
Interest
40
39
2.6
33
20.4
146.6
156.8
(6.5)
Depreciation
18
13
33.7
12
52.2
50.1
55.1
(9.0)
Other Income
8
17
18
36.2
48.1
PBT (excl. Ext Items)
46
58
(20.4)
58
(21.2)
216
194
11.1
Ext (Income)/Expense
PBT (incl. Ext Ite ms)
46
58
(20.4)
58
(21.2)
216
194
11.1
(% of Sales)
4.3
6.2
6.2
6.0
6.0
Provision for Taxation
11
20
20
71.4
64.9
10.0
(% of PBT)
24.8
34.4
33.9
33
33
Reported PAT
35
38
(8.8)
39
(10.3)
144
129
11.7
PATM
3.2
4.1
4.1
4.0
4.0
Minority Interest After NP
Extra-ordinary Items
Reported PAT
34.57
37.89
(8.8)
38.56
(10.3)
144.42
129.27
11.7
Equity shares (cr)
36
36
36
36
36
FDEPS (`)
1.0
1.0
(8.8)
1.1
(10.3)
4.0
3.6
11.7
Source: Company, Angel Research
May 28, 2018
2
LT Foods | 4QFY2018 Result Update
Key investment arguments
Market leadership with strong brand visibility:
LTFL’s flagship brand Daawat enjoys 22% market share in the branded rice market
in India. The company has strong market share in North America selling Basmati
rice under the brand name ‘Royal’. Historically, the company has been focusing on
strong brand visibility, and in order to enhance brand visibility it has significant ad
spend.
Wide distribution network
Currently, LTFL has access to 1,40,000 traditional retail outlets, covering 93% of
towns with over 2 lakh population and 3,000 wholesalers. Further, the company
sells its products to premium hotels & restaurants (~50% share), and has access to
6,000 foodservice outlets i.e. ‘DawatChefs Secretz”. Moreover, it has access to
2,500 modern trade stores including 121 hypermarkets, 298 supermarkets and
1,462 mini markets. It is also the first Rice Company to place Brown Basmati Rice
in Medical Chains.
Diversified product portfolio catering to varied customers
LTFL has a well-diversified product basket, which caters to consumers of all income
groups. The company is present in segments like Basmati rice, Speciality rice (non-
Basmati) and other food products. It is also consistently working on adding new
products to its portfolio. LTFL has done JV with Japanese Snack Food major
Kameda, which would launch rice based snacks in India. LTFL has recently
introduced ‘Daawat Rozana GoldPlus’ brand.
Strong global footprint
LT Foods is now an emerging global Foods Company with focus on basmati and
other speciality rice, organic foods and convenience rice-based products. LT Foods
has a global footprint, selling their flagship basmati rice brands Royal and Daawat
into 65 countries. The company has established on ground presence in the US,
Europe and Middle East in order to unlock the full potential of these territories.
May 28, 2018
3
LT Foods | 4QFY2018 Result Update
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 `76, the stock trades at a PE of 15.8x
and 12.6x its FY2019E and FY2020E EPS of `4.9 and `6.1 respectively. We
recommend BUY with target price of `128.
Risks
Increase in competition from unorganized players would impact overall
growth prospects of the company.
Basmati rice is an extremely volatile commodity. Hence, any unfavorable
change in Basmati rice prices could impact the company’s profitability.
Company derives ~52% revenue from overseas market; any unfavorable
change in currency could have an adverse impact on the company’s
profitability.
Company Background
LT Foods Limited (LTFL) is a branded speciality 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. Its
geographical segments include India, North America and Rest of the World. The
major brands of the company are Daawat, Gold Seal Indus Valley, Rozana and
817 Elephant.
May 28, 2018
4
LT Foods | 4QFY2018 Result Update
Consolidated Profit & Loss Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
3,287
3,614
4,047
4,533
% chg
10.5
10.0
12.0
12.0
Total Expenditure
2,920
3,237
3,610
4,034
Raw Material
2,405
2,671
2,975
3,318
Personnel
117
135
154
177
Others Expenses
398
431
482
539
EBITDA
366
376
437
499
% chg
17.2
2.7
16.2
14.1
(% of Net Sales)
11.1
10.4
10.8
11.0
Depreciation& Amortisation
54
50
71
74
EBIT
312
326
366
425
% chg
19.5
4.5
12.3
16.1
(% of Net Sales)
9.5
9.0
9.0
9.4
Interest & other Charges
155
147
143
142
Other Income
36
36
10
10
(% of PBT)
18.4
16.8
4.3
3.4
Share in profit of Associ ates
-
-
-
-
Recurring PBT
193
216
233
293
% chg
61.5
11.8
7.9
25.8
Tax
64
71
77
97
(% of PBT)
33.3
33.1
33.0
33.0
PAT (reported)
129
144
156
196
Minority Interest (after tax)
10
-
-
-
Profit/Loss of Associate Company
(1)
-
-
-
Extraordinary Items
-
-
-
-
ADJ. PAT
117
144
156
196
% chg
18.9
23.0
8.0
25.8
(% of Net Sales)
3.6
4.0
3.9
4.3
Basic EPS (`)
3.7
4.5
4.9
6.1
Fully Diluted EPS (`)
3.7
4.5
4.9
6.1
% chg
18.9
23.0
8.0
25.8
May 28, 2018
5
LT Foods | 4QFY2018 Result Update
Exhibit 2: Consolidated Balance Sheet
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
27
32
32
32
Reserves& Surplus
630
1,169
1,325
1,521
Shareholders Funds
656
1,201
1,357
1,553
Minority Interest
45
45
45
46
Total Loans
1,612
1,516
1,536
1,556
Deferred Tax Liability
5
5
5
6
Total Liabilities
2,318
2,767
2,943
3,161
APPLICATION OF FUNDS
Gross Block
736
926
966
996
Less: Acc. De preciation
365
416
487
560
Net Block
371
510
479
436
Capital Work-in-Progress
40
40
40
40
Investments
5
5
5
5
Current Assets
2,299
2,630
2,865
3,186
Inventories
1,448
1,729
1,941
2,173
Sundry De btors
463
495
554
621
Cash
41
29
34
43
Loans & Advances
179
215
174
168
Other Assets
167
163
162
181
Current liabilities
410
445
489
565
Net Current Assets
1,889
2,186
2,376
2,621
Deferred Tax Asset
13
13
13
14
Mis. Exp. not written off
-
-
-
-
Total Assets
2,318
2,754
2,914
3,116
Source: Company, Angel Research
May 28, 2018
6
LT Foods | 4QFY2018 Result Update
Exhibit 3: Consolidated Cashflow Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
195
216
233
293
Depreciation
54
50
71
74
Change in Working Capital
(125)
(308)
(186)
(236)
Interest / Dividend (Net)
143
147
143
142
Direct taxes paid
(44)
(71)
(77)
(97)
Others
(7)
0
0
0
C ash Flow from Operati ons
217
33
185
176
(Inc.)/ Dec. i n Fixed Assets
(85)
(220)
(40)
(30)
(Inc.)/ Dec. i n Inve stments
(4)
0
0
0
C ash Flow from Inve sting
(89)
(220)
(40)
(30)
Issue of Equity
2
0
0
0
Inc./(Dec.) in loans
23
(95)
20
20
Dividend Paid (Incl. T ax)
(4)
0
0
0
Interest / Divide nd (Net)
(145)
282
(159)
(157)
C ash Flow from Financing
(124)
186
(139)
(137)
Inc./(Dec.) in Cash
4
(1)
5
9
O pening Cash balance s
26
30
29
34
Closing Cash balances
30
29
34
43
Source: Company, Angel Research
May 28, 2018
7
LT Foods | 4QFY2018 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
Valuati on Ratio (x)
P/E (on FDEPS)
21.0
17.1
15.8
12.6
P/CEPS
13.5
12.7
10.9
9.1
P/BV
3.8
2.1
1.8
1.6
Dividend yield (%)
0.0
0.0
0.0
0.0
EV/Sales
1.2
1.1
1.0
0.9
EV/EBITDA
11.0
10.5
9.1
8.0
EV / Total Assets
1.7
1.4
1.4
1.3
Per Share Data (`)
EPS (Basic)
3.7
4.5
4.9
6.1
EPS (fully diluted)
3.7
4.5
4.9
6.1
Cash EPS
5.7
6.1
7.1
8.4
DPS
0.0
0.0
0.0
0.0
Book Value
20.5
37.5
42.4
48.6
Returns (%)
ROCE
13.8
12.0
12.7
13.7
Angel ROIC (Pre-tax)
14.0
12.2
12.8
13.9
ROE
17.9
12.0
11.5
12.6
Turnover rati os (x)
Asset Turnover (Gross Block)
4.5
3.9
4.2
4.6
Inventory / Sales (days)
161
175
175
175
Receivables (days)
51
50
50
50
Payable s (days)
24
24
24
25
Working capital cycle (ex-cash) (days)
188
201
201
200
May 28, 2018
8
LT Foods | 4QFY2018 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and MCX Stock Exchange Limited. It is also registered as a Depository Participant with CDSL and
Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Private Limited is a
registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration numb er
INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing
/dealing in securities Market. Angel or its associates including its relatives/analyst do not hold any financial interest/ben eficial
ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /
managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst
has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity
of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as th e basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document sho uld
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to de termine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in th is report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
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or in connection with the use of this information.
Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please r efer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
LT Foods
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
MaNote: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
9
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
