The company’s financial and operating performance demonstrates management’s ability to arrest slowdown in sales and profitability by being more innovative interms of launching products in line with growing preference of aspiring populace, acquiring brands which helped penetrate in the regions with large demand and setting up of manufacturing facilities to cater to regional demand and capitalize ontax/duty benefits. We have valued the stock on PE 6.8x of FY21 EPS with upwardlyrevised TP of Rs. 40 which gives potential upside of 76%. Key risks to valuationinclude regulatory changes and Fx-fluctuations.
FY19 has proved to be great year for basmati rice industry at both domestic and export fronts wherein exports have grown 22% over FY18. Middle East witnessed a sharp rise in import from India. Constraints with LT Foods Ltd. are that it has low penetration in Middle East with about 75 percent of basmati import from India. We value the stock at 9 years average of PE6.1x of FY21E EPS for downwardly revised TP of Rs. 34 with potential upside of 14% and rate “HOLD” on stock. Risk to valuation could be slowdown in basmati demand in North America and European regions.