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 `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% yoy to `35cr on 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 `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.

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