Buy LT Foods, target Rs 81: Karvy Stock Broking Ltd

Karvy Stock Broking has a buy call on LT Foods with a target price of Rs 81.

The current market price of LT Foods is Rs 55.70.

Time period given by the brokerage is one year when LT Foods price can reach the defined target.


View of the brokerage on the company:
LT Foods Limited has posted strong performance on consolidated basis in Q1FY19 wherein revenue from operations stood at Rs 8400 Mn, up by 11.7 per cent but down by 9 per cent against our revenue estimate of Rs 9226 Mn on YoY basis.

The growth in revenue was mainly led by solid gains in international and domestic branded revenue which grew by 18 per cent on YoY Basis.

The contribution of branded sales to total sales in Q1FY19 increased to 69 per cent against 66 per cent in the same period last year.

Average realization for domestic branded sales increased to Rs 54/kg, an increase of 5 per cent. Branded sales market share for the company in India has increased to 28 per cent in Q1FY19 from 26 per cent same period last year.

However, EBITDA de-grew by 2.1 per cent wherein EBITDA margin contracted by 156 bps on YoY basis due to higher purchase of stock in trade which stood at 31 per cent of revenue in Q1FY19 as against 25 per cent in same period last year.

PAT in Q1FY19 came in at Rs 396 Mn which increased by 13.4 per cent as a result of lower interest cost and lower tax expenditure: and higher other income, contributing EPS to grow by 16.0 per cent on YoY basis.

Going forward, the company is likely to experience top-line growth at CAGR of 11.0 per cent and bottom-line growth at CAGR 27.9 per cent during FY18-20E on the back of continued high double-digit growth in modern, rural and metro trade, ramping up of EU processing facilities which will service demand across continent, organic business maintaining of strong momentum and China opportunities.

The management expects Rs 2,500 Mn revenue from EU facility by FY19 against full capacity of Rs 4,000 Mn.

Organic business of the company has been growing at CAGR of 14 per cent wherein most of the demand originates from Europe and America.

HoReCa (Hotel, Restaurant and Café) business too has grown by 27 per cent which reflects dwindling impact of GST input credit issue. KariKari snacks and Daawat Rice Saute sauces have shown very encouraging initial result and are expected to be revenue growth driver soon.