Review

In this edition, we have reviewed LT Foods Limited and Oricon Enterprises Limited. We suggest our reader-investors to book profit in LT Foods and hold in Oricon Enterprises

We had previously recommended LT Foods Limited in Volume 34, Issue No. 15, dated June 24 – July 07, 2019 under the ‘Low Priced Scrip’ segment when the scrip was trading at Rs.24. It was recommended based on growth prospects, revenue visibility, and industry tailwinds. It is a branded specialty foods company that is engaged in milling, processing and marketing of branded and non-branded basmati rice and manufacturing of rice food products. 

On the consolidated financial front for Q1FY20, the company posted net sales of Rs.980.27 crore, which is an increase by 16.7 per cent compared to net sales of Rs.840 crore for Q1FY19. The PBDT increased by 18% to Rs.88.4 crore in Q1FY20 as against Rs.74.91 crore in Q1FY19. 

The company’s net profit rose by 14.02 per cent to Rs.45.86 crore compared to net profit of Rs.40.22 crore in Q1FY19. To take a look at its annual financial trend, for FY19 the net sales of the company increased by 7.66% year-onyear to Rs.3,890.43 crore. The PBDT increased by 5.6 per cent and stood at Rs.282.66 crore for FY19 and Rs.267.67 crore for FY18. The net profit decreased by 5.95 per cent to Rs.137.48 crore in FY19 from Rs.146.18 crore in FY18. Post our recommendation, the stock price has increased by around 22 per cent. 

Recently, LT Foods received approval for transfer of investments in LT Foods International, UK, a wholly-owned subsidiary of the company, to LT Overseas North Americas Inc., USA, another wholly-owned subsidiary of the company at fair value as determined by an independent merchant bank, with an intent to consolidate its international business. The above-mentioned transfer is a first step towards the long-term goal of the company to consolidate its global businesses under one entity, thereby make its overseas business structure leaner. Thus, we suggested our investorreaders to BOOK PROFIT on Sept 11, 2019



We had previously recommended Oricon Enterprises in Volume 33, Issue No. 26, dated November 26 – December 09, 2018 under the ‘Low Priced Scrip’ segment when the stock was trading at Rs.32. It was recommended based on robust revenue growth and for the fact that chemicals stocks were in favour. The company’s capex plans had looked good too. Oricon Enterprises Ltd. is engaged in the business of manufacturing petrochemical products and developing real estate. The company is also engaged in the business of trading, PET bottles, petrochemicals, and liquid colorants. 

Looking at the quarterly trends on a consolidated basis, for Q1FY20, the company posted net sales of Rs.342.29 crore, which is an increase by 38.44% compared to net sales of Rs.247.24 crore for Q1FY19. For Q1FY20, the company gained an operating profit of Rs.26.39 crore as against an operating loss of Rs.3.35 crore in Q1FY19. The company gained a net profit of Rs.23.56 crore in Q1FY20 whereas in Q1FY19 the company had incurred a net loss of Rs.5.18 crore. 

To take a look at the annual financial trend, for FY19 the net sales of the company increased by 9.76 per cent to Rs.1,111.75 crore from Rs.1,012.87 crore for FY18. The PBT increased by 36.48 per cent and stood at Rs.49.42 crore for FY19 as compared to Rs.36.21 crore for FY18. The net profit increased by 79.56 per cent to Rs.40.33 crore in FY19 from Rs.22.46 crore in FY18. On the valuations front, the company is currently trading at a P/E of 6.54x against the industry P/E of 10.36x on its TTM earnings. The TTM EPS stood at Rs.3.40. The company’s dividend yield stood at 2.25 per cent. Since our recommendation, the stock has fallen by 31%. However , we recommend a HOLD 

(Closing price as of Sept 25, 2019)