Markets
BSE See NSE See 39,046.34
85.55 (0.22%)
collapse Related Readings collapse

Stock Pick From The Trading Sector

| 3/7/2013 9:00 PM Thursday

Low Priced Scrip is a hidden gem, today's underdog, a stock with future potential that is expected to fetch returns within 1 year. This is a stock picked carefully based on a fundamental analysis of the company.

The company recommended as the Low Priced Scrip for this issue is a leading company in the Trading sector.

HERE IS WHY:

  • An expansion strategy that focusses on growth from new products and new geographies
  • Entry into fast growing segments like organic foods and packaged snacks
  • Robust revenue growth and good prospects of profitability

There was a time when foodgrains were just plain commodities. The local kirana store was your one-stop shop and the price points defined what you bought. But the ever changing nature of the markets brings about a change in the way certain goods and services are sold. We are recommending the stock of a company which has gone through this and evolved as a prominent player in a rather unorganised market.

Established in 1965, LT Foods has come a long way. Started as a small trading company, it moved on to becoming a partnership as Lalchand Tirathram Rice Mills, and further to milling, processing and marketing branded basmati rice in the domestic and international markets. Now that it has made a strong presence in the market with brands like Daawat, it is now looking at its next phase of growth by entering new segments.

LT Foods’ traditional business of basmati rice has been successful for years. It has grabbed the second position in domestic markets and more than a 40 per cent market share in US, Australia and Mauritius. Through various additions in brands (Chef’s Secretz, Devaaya, etc.), products (fast cook brown rice, pulav rice, etc.) and geographies (exports to over 50 countries), this division continues to expand its horizons. To fuel growth further, the company plans to add new blends of rice under its Royal brand to augment its core business in the US. In addition to this, it plans to add about a dozen countries to cater to in its geographical spread in FY13. Furthermore, its international trading business is set for expansion into procurement and supply of non-basmati rice and other staples.

SHAREHOLDING PATTERN AS ON 31/12/2012
Promoters 61.84
FII 14.7
DII 0.02
Others 23.44
GRAND TOTAL 100

Apart from this, it has also forayed into the organic foods segment, wherein it manufactures and sells products like rice, pulses, soya bean, cashew nuts and flaxseeds, among others, under the brand name Ecolife. In this segment too, LT Foods has expanded by entering geographies like Italy and France and launching niche products like millets, spices and baby foods. In FY12, its organic food exports saw a growth of 98 per cent. This is expected to grow further as the company expands into newer geographies and augments its product portfolio.

In 2011, the company soft launched a wide range of rice-based products under the brand name ‘My My’, offering low-fat baked rice cakes and rice chips. The pan-India launch of this brand is expected to take place any time soon. Considering the growth of this segment and the fact that LT Foods has an established network of over 400 distributors and over 80000 retailers, it would not be a difficult job for this brand to make it big.

LAST FIVE QUARTERS (Rs/CR)
Dec '12Sep '12Jun '12Mar '12Dec '11
Sales 583.87 434.48 585.39 507.73 440.87
Operating Profit 59.36 47.34 68.93 71.68 51.18
Interest 30.29 25.57 28.65 35.72 38.22
Depreciation 9.75 9.23 8.38 9.54 9.3
Net Profit 14.91 15.21 8.23 28.37 -8.24
Equity Capital 26.12 26.12 26.12 26.12 26.12

However, the rapid expansion that LT Foods has seen over the years has come at a cost. The company is operating at a debt-to-equity ratio of 4.54x. On a consolidated basis, although CAGR of revenues for the last five years has been 15.52 per cent, FY12 was a year where LT Foods posted a loss of Rs 2.02 crore (revenues of Rs 1421.76 crore). This loss was mainly due to the interest costs, which amounted to as much as 65 per cent of the EBITDA during the year. But with the kind of revenue growth the company has seen so far and the potential its two-fold expansion process offers, the debt level doesn't seem to be a big reason to worry.

With all the expansion plans in place, LT Foods expects to see a growth of 25 per cent in FY13. It has already achieved 90 per cent of this target, with one quarter of the financial year still to go. So far, it has also achieved profits of Rs 38.35 crore, thus ensuring a profitable FY13. Available with high growth momentum and at a TTM PE of 2.09x, the stock is a good buy with favourable prospects. Buy into it for at least 25 per cent returns over the next one year.

 

Find More Articles on: DSIJ Magazine, Low Priced Scrip, Stock Recommendations, Fundamental Picks, Product, Small Cap, Large Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

MIDHANI and HAL partner to develop bio implants

Geyatee Deshpande / Article rating: 5.0

Mishra Dhatu Nigam Limited (MIDHANI) signs an MoU with Hindustan Antibiotics Limited (HAL). This MoU will provide synergy for quality manufacturing of MIDHANI’s Bio-medical Implants and get access to the pan-India distribution of HAL. This partnership is aimed to gain advantage from the strengths of both the companies and benefit users of Bio-medical products in India.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.