Recommendation From Edible Oils Sectors
This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon
Sanwaria Consumer Ltd (SCL)
CHANTING THE GROWTH MANTRA WITH PATANJALI
HERE IS WHY
Robust financials
Tie up with Patanjali
Product diversification
Sanwaria Consumer Ltd (SCL), a part of the Sanwaria Group, is an FMCG company engaged in the business of manufacturing and selling of rice, edible oil and staple food products like pulses, sugar, soya chunks, wheat glour, rice flour, salt, suji, maida, besan, daliya, soya meal, etc. SCL is one of the largest integrated food processors in India.
Recently, SCL entered into an agreement with Patanjali Ayurved to manufacture and supply soya chunks or soya bari under the ‘Patanjali Brand’. SCL had been supplying chakki-fresh atta to Patanjali in the past. The management of the company expects more such agreement in the near future and looking forward to long association with Patanjali for its other products like soyabean oil, rice bran oil and Basmati rice etc.
Also, Patanjali has recently tied-up with online platforms or virtual marketing networks like Flipkart, Amazon, Bigbasket, Grofers, etc. SCL's products will also be available on all these platforms. Further, considering the leadership position of Patanjali in the FMCG sector in India, the management of the company is confident of a favourable impact on the overall topline and bottomline growth of the company in the coming quarters. Also, earlier in January this year, the company launched 10 new products and increased its product range from 25 to 35.
On the financial front, on a standalone basis, the company’s revenue increased 11.64 per cent from Rs 1,140.67 crore in Q3FY17 to Rs 1,273.49 crore in Q3FY19. The company’s PBDT also soared drastically by 127.99 per cent to Rs 33.97 crore in Q3FY18 from Rs 14.9 crore in Q3FY17. The company’s net profit also rose from Rs 11.4 crore in Q3FY17 to Rs 25.08 crore in Q3FY18, registering an increase of 120 per cent.
On an annual basis, Sanwaria Consumers Ltd posted 29.74 per cent increase in its revenue to Rs 3,512.44 crore in FY17 from Rs 2,707.21 crore in FY16. The company’s PBDT surged by 20.02 per cent to Rs 57.43 crore in FY17 on a yearly basis. The company’s net profit increased by 180.42 per cent to Rs 43.97 crore in FY17 from Rs 15.68 crore in FY16.
On the valuation front, the company is trading at a price-to-earnings ratio of 17.98x as against its peer Umred Agro Complex (61.42x). The company has a debt-to-equity ratio of 2.44x. The company’s return on equity (RoE) and return on capital employed (RoCE) stood at 13.36 per cent and 8.48 per cent, respectively. The company is expected to post good quarterly numbers. SCL has good consistent profit growth of 20.86 per cent over the past five years. The stock is currently trading at around Rs 20 after correcting from a high of Rs 33.
SCL’s profits have doubled on a TTM basis due to the tie-up with Patanjali to supply biscuits and also due to formation of a subsidiary in Dubai. With normal monsoon expected in the northern belt and SCL’s expanding presence, we expect the company to continue to do well going forward. We recommend our reader-investors to BUY the stock.
