Buy LT Foods, target price Rs 520: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on LT Foods Ltd. with a target price of Rs 520. The current market price of LT Foods is Rs 391.45. LT Foods Ltd, incorporated in 1990, is a Small Cap company with a market cap of Rs 13364.03 crore operating in FMCG sector.

LT Foods' key products/revenue segments include Others, Paddy, By Products, Other (Traded), Export Incentives, Service Charges, Bardana, Rental Income, Other Operating Revenue, Processing Charges for the year ending 31-Mar-2023.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 2134.04 crore, up 2.21% from last quarter Total Income of Rs 2088.00 crore and up 7.14% from last year same quarter Total Income of Rs 1991.81 crore. The company has reported net profit after tax of Rs 141.77 crore in latest quarter.

Investment Rationale
LT Foods has achieved a robust CAGR of 15% in revenue and 19% in EBITDA during FY19 to FY24, bolstered by innovative products and a focus on organic offerings. With a presence in key consuming regions, LTFOODS aims to enhance its market share through strategic marketing and distribution, particularly in the Middle East. Over the last five years, LTFOODS rerated from ~8x P/E (average of the last five years; one-year forward) to ~21x (in FY25), fueled by strong cash flow generation (cumulative FCF of Rs 17.7 billion), consistent performance (36% PAT CAGR) due to product and geographical diversification, and improved RoE/RoCE (of 19%/16% in FY24).

Transitioning from a commodity to an FMCG model, these factors position LTFOODS nearer to its FMCG peer valuation. Motilal Oswal Financial Services estimates that LTFOODS will record a revenue/EBITDA/adj. PAT CAGR of 14%/15%/19% over FY24-27. It is currently trading at ~21x/16x/13x FY25E/FY26E/FY27E EPS with an FY27E RoE/RoCE of ~20% each. The brokerage has initiated coverage on the stock with a BUY rating and a target price of Rs 520, based on 18x FY27E P/E.

Promoter/FII Holdings
Promoters held 51 per cent stake in the company as of 30-Sep-2024, while FIIs owned 8.03 per cent, DIIs 5.76 per cent.