For 3QFY2018, LT Foods Ltd (LTFL) posted results in line with our expectations on top-line and bottom-line fronts. Revenue grew by ~19% yoy to `941cr, driven by healthy growth in domestic as well as international businesses. On the operating front, margins contracted by 275bp yoy due to loss of `10cr in European operations and one-time bad debt write off of `14cr. However, lower depreciation and interest cost boosted PAT growth of ~16% yoy to `39cr.
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 ~27% CAGR following robust improvement in operating performance. We expect margin expansion from better manufacturing efficiency, increase in scale and change in product mix. At the current market price of `92, the stock trades at a PE of 16.7x and 13.0x its FY2018E and FY2019E EPS of `5.5 and `7.1, respectively. We recommend BUY with target price of `128.

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