The Economic Times daily newspaper is available online now.

    4 triggers that can spark another 30% rally in Patanjali Foods

    Synopsis

    Stating that Patanjali Foods is well on its way to be a diversified FMCG and FMHG-focused company with widely recognised brands (Ruchi, Nutrela, Patanjali) across value chain, it said the company will outperform peers through portfolio diversification and benefit from PAL's strong distribution network.

    4 triggers that can spark another 30% rally in Patanjali FoodsAgencies
    Having rallied over 65 per cent in the last 6 months, the shares of Patanjali Foods can rally up to another 30 per cent to Rs 1,725, Antique Stock Broking said while initiating coverage on the counter.

    Patanjali Foods, which was earlier known as Ruchi Soya and eventually re-branded following acquisition by Baba Ramdev-led Patanjali Ayurved, was locked at 5 per cent upper circuit at Rs 1,324.30 - its new 52-week high.

    The domestic brokerage, which has valued the stock based on 35x FY24e EPS, expects Patanjali Foods' revenue to grow at 22 per cent CAGR over FY22-24E driven by strong growth in FMCG business (contribution increasing from 8 per cent in FY22 to 22 per cent in FY24E) and ~13 per cent CAGR in oil business.

    "The premium valuation is justified given the a) premiumisation of the portfolio, b) higher contribution from superior margin of FMCG business (14-44 per cent of EBITDA over FY22-24) c) operating leverage and d) better cost control," Antique said.

    Additionally, improving performance with stable working capital requirements and no major capex will help the company to generate strong cash flow and improve return ratios, it said.

    Stating that Patanjali Foods is well on its way to be a diversified FMCG and FMHG-focused company with widely recognised brands (Ruchi, Nutrela, Patanjali) across value chain, it said the company will outperform peers through portfolio diversification and benefit from PAL's strong distribution network.

    Performance would be driven by big categories like biscuits, ghee, Patanjali's premium edible oil, ayurvedic products (aloe vera, amla juice, etc.) and aggressive expansion in promising categories like nutraceuticals and spices, it said.

    The stock, which hardly has any analyst coverage, has skyrocketed over 5,400 per cent in the last 3 years.

    Key risk factors to the trade include volatility in edible oil prices which may impact short term margin, heightened competition in FMCG business and lower than expected synergy benefit from PAL's distribution.

    (Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)




    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in