Recommendation From Edible Oils Sector

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

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COOKING UP A GOOD RECIPE OF SUCCESS 

HERE IS WHY
Improving financials
Favourable macroeconomic factors
Expanding sales network

Kriti Nutrients Limited is engaged in soya seed extraction and manufacturing and selling of cooking oil under its own brand Kriti. The company's primary products include soya lecithin flakes and flour and soya refined oil. Its soya plant is located at Dewas, with an area of approximately 60,520 square metres. The company is also engaged in trading of sunflower oil. 

Indian soyabean is a non-genetically modified organism (GMO) crop and has an advantage over other origins. Hence, the demand for non-GMO protein rich soya is continuously growing and Kriti looks well-poised to harness the opportunity. The company has created a niche market segment for itself through its quality soya products and strong distribution network. It is also expanding sales network for Kriti soya refined oil, which caters to the premium segment of the market.

The company is focusing on value-added products for which it plans to invest in modernising the refinery complex which, in turn, will help it to achieve greater operational efficiencies and capabilities to produce varied products. 

Also, to improve the overall business margin, the company plans to identify high margin value-added products for food, pharmaceutical and nutrition industry and align them with its overall product offering. Kriti is also focussing to increase its penetration in export markets as its products meet global norms and are used in food and pharmaceutical applications. We expect the GST to aid the company as it is exploring to expand its geographical reach by developing strong distribution network outside the existing markets. 

On the financial front, the net sales of the company increased 4.87 per cent to Rs 91.49 crore in the second quarter of FY18, as against Rs 87.24 crore in the same quarter of the previous year. The company’s PBDT increased 178.72 per cent to Rs.5.24 crore in the second quarter of FY18 on a yearly basis. The company’s net profit also increased handsomely by 215.79 per cent to Rs 3 crore in Q2FY18, as against a net profit of Rs 0.95 crore in the second quarter of the previous year.

On an annual basis, the company’s net sales increased 27.55 per cent to Rs 456.54 crore in FY17 on a year-on-year basis. The company’s PBDT increased 5.06 per cent to Rs. 12.05 crore in FY17, as against Rs. 11.47 crore in the previous fiscal. The net profit of the company rose 0.32 per cent to Rs. 6.31 crore in FY17, as against Rs. 6.29 crore in the previous fiscal.

On the valuation front, the company has a PE ratio of 15.87x as against its peer Jayant Agro Organics (20.80x) and Agro Tech Foods (51.15x). The company’s return on equity (RoE) and return on capital employed (RoCE) stood at 17.83 per cent and 19.28 per cent, respectively. The company has a debt-to-equity ratio of 0.90x. 

The company is expected to come up with good quarterly numbers. The stock has gained over 89 per cent in the last one year. Currently, the overall outlook for the company looks better and is likely to continue its growth momentum. We recommend our reader-investors to BUY the stock.