3QFY2018 Result Update | Media

February 12, 2018

LT Foods

BUY

CMP

`92

Performance Update

Target Price

`128

Y/E March (` cr)

3QFY18

3QFY17

% yoy

2QFY18

% qoq

Investment Period

12 Months

Net sales

941

790

19.1

853

10.3

EBITDA

(8.5)

(11.8)

Stock Info

Sector

Food Processing

EBITDA margin (%)

9.1

11.9

(275bp)

11.4

(229bp)

Market Cap (` cr)

2,970

A djusted PAT

16.3

5.9

Net Debt (` cr)

1,565

Beta

1.0

Source: Company, Angel Research

52 Week High / Lo

110/49

Avg. Daily Volume

30,429

For 3QFY2018, LT Foods Ltd (LTFL) posted results in line with our expectations on

Face Value (`)

top-line and bottom-line fronts. Revenue grew by ~19% yoy to `941cr, driven by

BSE Sensex

34,300

Nifty

10,540

healthy growth in domestic as well as international businesses. On the operating

Reuters Code

LTOL.BO

front, margins contracted by 275bp yoy due to loss of `10cr in European

Bloomberg Code

LTFO.IN

operations and one-time bad debt write off of `14cr. However, lower depreciation

and interest cost boosted PAT growth of ~16% yoy to `39cr.

Shareholding Pattern (%)

Promoters

56.0

Top-line driven by healthy revenue growth in domestic and international

MF / Banks / Indian Fls

15.0

FII / NRIs / OCBs

7.3

businesses: The company’s top-line grew by ~19% yoy to `941cr on the back of

Indian Public / Others

21.7

strong domestic and international growth (up by ~23%). During the 9MFY2018,

contribution of branded revenues to overall revenues has increased from 56% to

Abs.(%)

3m 1yr

3yr

Sensex

2.3

20.0

20.5

61%, while realizations were up by ~14% (`69/Kg Vs. `61/Kg). During the

LT Food

24.2

55.4

703.0

quarter, LTFL has launched the new avatar of leading brand “Daawat” and quick

cook brown rice. These new initiatives are expected to give a new look and feel to

the brand, along with more information to the consumer.

3-year price chart

Lower depreciation and interest cost boosted the profitability: On the operating

front, margins contracted by 275bp yoy due to loss of `10cr in European

120

operations and one-time bad debt write off of `14cr. However, lower depreciation

100

and interest cost boosted PAT growth of ~16% yoy to `39cr. During quarter, the

company has raised QIP `400cr which would be utilised to deleverage and to

strengthen its balance sheet.

Outlook and Valuation: Going forward, we expect the company to report healthy

top-line CAGR of 12% over the next two years on the back of strong distribution

network & brand, continuing expansion, wide product basket and addition of new

products in portfolio. On the bottom-line front, we expect ~27% CAGR following

robust improvement in operating performance. We expect margin expansion from

Source: Company, Angel Research

better manufacturing efficiency, increase in scale and change in product mix. At

the current market price of `92, the stock trades at a PE of 16.7x and 13.0x its

FY2018E and FY2019E EPS of `5.5 and `7.1, respectively. We recommend BUY

with target price of `128.

Key financials

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

Net sales

2,973

3,287

3,647

4,122

Amarjeet S Maurya

% chg

7.0

10.5

11.0

13.0

022-39357800 Ext: 6831

Net profit

117

147

189

[email protected]

% chg

36.3

18.9

25.4

28.5

EBITDA margin (%)

10.5

11.1

11.2

11.3

EPS (`)

3.1

3.7

4.6

5.9

P/E (x)

29.8

25.1

20.0

15.6

P/BV (x)

5.5

4.5

2.4

2.1

RoE (%)

18.4

17.9

12.2

13.6

RoCE (%)

12.2

13.8

14.8

15.6

EV/Sales (x)

1.5

1.4

1.1

1.0

EV/EBITDA (x)

14.4

12.3

9.9

8.6

Source: Company, Angel Research, Note: CMP as of February 12, 2018

Please refer to important disclosures at the end of this report

LT Foods | 3QFY2018 Result Update

Exhibit 1: 3QFY2018 Performance

Y/E March (` cr)

3QFY18

3QFY17

% yoy

2QFY18

% qoq

9MFY18

9MFY17

% chg

Net Sales

941

790

19.1

853

10.3

2543.1

2317.39

9.7

Consumption of RM

713.8

559.51

27.6

608.0

17.4

1841.5

1684.3

9.3

(% of Sales)

75.9

70.8

71.3

72.4

72.7

Staff Costs

19.9

12.4

96.4

81.8

17.8

(% of Sales)

3.6

3.8

3.5

Other Expenses

107

108

(0.8)

118

(8.7)

324.9

287.2

13.1

(% of Sales)

11.4

13.7

13.8

12.8

12.4

Total Expenditure

855

696

22.9

756

13.1

2,263

2,053

10.2

Operating Profit

(8.5)

(11.8)

280

264

6.1

OPM

9.1

11.9

11.4

11.0

11.4

Interest

(18.1)

34.0

(1.7)

106.4

117.6

(9.5)

Depreciation

(21.2)

9.1

26.5

32.6

42.0

(22.4)

Other Income

28.5

31.9

PBT (excl. Ext Items)

23.5

4.7

170

136

24.4

Ext (Income)/Expense

PBT (incl. Ext Ite ms)

23.5

4.7

170

136

24.4

(% of Sales)

6.2

6.0

6.5

6.7

5.9

Provision for Taxation

60.0

45.1

33.1

(% of PBT)

33.9

29.8

34.7

Reported PAT

16.3

5.9

110

20.2

PATM

4.1

4.2

4.3

3.9

Source: Company, Angel Research

February 12, 2018

LT Foods | 3QFY2018 Result Update

Key investment arguments

Market leadership with strong brand visibility:

LTFL’s flagship brand Daawat enjoys 22% market share in the branded rice market

in India. The company has strong market share in North America selling Basmati

rice under the brand name ‘Royal’. Historically, the company has been focusing on

strong brand visibility, and in order to enhance brand visibility it has significant ad

spend.

Wide distribution network

Currently LTFL has access to 1,40,000 traditional retail outlets, covering 93% of

towns with over 2 lakh population and 3,000 wholesalers. Further, the company

sells its products to premium hotels & restaurants (~50% share), and has access to

6,000 foodservice outlets i.e. ‘DawatChefs Secretz”. Moreover, it has access to

2,500 modern trade stores including 121 hypermarkets, 298 supermarkets and

1,462 mini markets. It is also the first Rice Company to place Brown Basmati Rice

in Medical Chains.

Diversified product portfolio catering to varied customers

LTFL has a well-diversified product basket, which caters to consumers of all income

groups. The company is present in segments like Basmati rice, Speciality rice (non-

Basmati) and other food products. It is also consistently working on adding new

products to its portfolio. LTFL has done JV with Japanese Snack Food major

Kameda, which would launch rice based snacks in India. LTFL has recently

introduced ‘Daawat Rozana GoldPlus’ brand.

Strong global footprint

LT Foods is now an emerging global Foods Company with focus on basmati and

other speciality rice, organic foods and convenience rice-based products. LT Foods

has a global footprint, selling their flagship basmati rice brands Royal and Daawat

into 65 countries. The company has established on ground presence in the US,

Europe and Middle East in order to unlock the full potential of these territories.

February 12, 2018

LT Foods | 3QFY2018 Result Update

Outlook and Valuation

Going forward, we expect the company to report healthy top-line CAGR of 12%

over the next two years on the back of strong distribution network & brand,

continuing expansion, wide product basket and addition of new products in

portfolio. On the bottom-line front, we expect ~27% CAGR following robust

improvement in operating performance. We expect margin expansion from better

manufacturing efficiency, increase in scale and change in product mix. At the

current market price of `92, the stock trades at a PE of 16.7x and 13.0x its

FY2018E and FY2019E EPS of `5.5 and `7.1, respectively. We recommend BUY

with target price of `128.

Exhibit 2: One year forward PE Chart

100

4.0 X

6.0 X

8.0 X

10.0 X

12.0 X

Source: Company, Angel Research

Risks

 Increase in competition from unorganized players would impact overall

growth prospects of the company.

 Basmati rice is an extremely volatile commodity. Hence, any unfavorable

change in Basmati rice prices could impact the company’s profitability.

 Company derives ~52% revenue from overseas market; any unfavorable

change in currency could have an adverse impact on the company’s

profitability.

Company Background

LT Foods Limited (LTFL) is a branded speciality foods company engaged in milling,

processing and marketing of branded and non-branded basmati rice, and

manufacturing of rice food products in the domestic and overseas markets. Its

geographical segments include India, North America and Rest of the World. The

major brands of the company are Daawat, Gold Seal Indus Valley, Rozana and

817 Elephant.

February 12, 2018

LT Foods | 3QFY2018 Result Update

Consolidated Profit & Loss Statement

Y/E March (` cr)

FY2015

FY2016

FY2017

FY2018E

FY2019E

Total operating income

2,779

2,973

3,287

3,647

4,122

% chg

11.5

7.0

10.5

11.0

13.0

Total Expenditure

2,471

2,661

2,920

3,239

3,656

Raw Material

2,076

2,105

2,405

2,677

3,017

Personnel

117

139

152

Others Expenses

321

466

398

423

486

EBITDA

308

313

366

409

466

% chg

9.6

1.6

17.2

11.5

14.0

(% of Net Sales)

11.1

10.5

11.1

11.2

11.3

Depreciation& Amortisation

EBIT

261

312

358

409

% chg

7.3

(0.0)

19.5

14.7

14.3

(% of Net Sales)

9.4

8.8

9.5

9.8

9.9

Interest & other Charges

151

148

155

143

116

Other Income

(% of PBT)

1.1

5.2

18.4

10.4

4.9

Share in profit of Associ ates

Recurring PBT

111

120

193

240

308

% chg

(15.1)

7.5

61.5

24.5

28.3

Tax

102

(% of PBT)

31.3

39.4

33.3

33.0

PAT (reported)

129

161

207

Minority Interest (after tax)

(0)

Profit/Loss of Associate Company

(1)

Extraordinary Items

(27)

ADJ. PAT

117

147

189

% chg

(7.5)

36.3

18.9

25.4

28.5

(% of Net Sales)

2.6

3.3

3.6

4.0

4.6

Basic EPS (`)

2.3

3.1

3.7

4.6

5.9

Fully Diluted EPS (`)

2.3

3.1

3.7

4.6

5.9

% chg

(7.5)

36.3

18.9

25.4

28.5

February 12, 2018

LT Foods | 3QFY2018 Result Update

Exhibit 3: Consolidated Balance Sheet

Y/E March (` cr)

FY2015

FY2016

FY2017

FY2018E

FY2019E

SOURCES OF FUNDS

Equity Share Capital

Reserves& Surplus

436

510

630

1,171

1,361

Shareholders Funds

463

537

656

1,203

1,393

Minority Interest

Total Loans

1,692

1,597

1,612

1,212

1,232

Deferred Tax Liability

Total Liabilities

2,194

2,169

2,318

2,465

2,674

APPLICATION OF FUNDS

Gross Block

638

676

736

766

Less: Acc. De preciation

268

315

365

416

472

Net Block

370

361

371

320

294

Capital Work-in-Progress

Investments

Current Assets

2,052

2,065

2,299

2,545

2,847

Inventories

1,362

1,300

1,448

1,609

1,807

Sundry De btors

318

376

463

500

565

Cash

108

146

Loans & Advances

319

189

179

164

165

Other Assets

168

167

164

165

Current liabilities

256

296

410

457

522

Net Current Assets

1,796

1,769

1,889

2,088

2,325

Deferred Tax Asset

Mis. Exp. not written off

Total Assets

2,194

2,169

2,318

2,465

2,674

Source: Company, Angel Research

February 12, 2018

LT Foods | 3QFY2018 Result Update

Exhibit 4: Consolidated Cashflow Statement

Y/E March (` cr)

FY2015

FY2016

FY2017

FY2018E FY2019E

Profit before tax

111

163

195

240

308

Depreciation

Change in Working Capital

(245)

(69)

(125)

(132)

(199)

Interest / Dividend (Net)

145

140

143

116

Direct taxes paid

(50)

(34)

(44)

(79)

(102)

Others

(7)

C ash Flow from Operati ons

297

217

222

180

(Inc.)/ Dec. i n Fixed Assets

(55)

(53)

(85)

(30)

(Inc.)/ Dec. i n Inve stments

(3)

(1)

(4)

C ash Flow from Inve sting

(58)

(54)

(89)

(30)

Issue of Equity

Inc./(Dec.) in loans

184

(93)

(400)

Dividend Paid (Incl. T ax)

(6)

(5)

(4)

Interest / Divide nd (Net)

(147)

(142)

(145)

286

(132)

C ash Flow from Financing

(235)

(124)

(114)

(112)

Inc./(Dec.) in Cash

(17)

O pening Cash balance s

108

Closing Cash balances

108

146

Source: Company, Angel Research

February 12, 2018

LT Foods | 3QFY2018 Result Update

Key Ratios

Y/E March

FY2015

FY2016

FY2017

FY2018E FY2019E

Valuati on Ratio (x)

P/E (on FDEPS)

40.6

29.8

25.1

20.0

15.6

P/CEPS

23.9

23.7

16.1

13.9

11.2

P/BV

6.4

5.5

4.5

2.4

2.1

Dividend yield (%)

0.2

0.0

EV/Sales

1.7

1.5

1.4

1.1

1.0

EV/EBITDA

15.0

14.4

12.3

9.9

8.6

EV / Total Assets

2.1

1.9

1.6

1.5

Per Share Data (`)

EPS (Basic)

2.3

3.1

3.7

4.6

5.9

EPS (fully diluted)

2.3

3.1

3.7

4.6

5.9

Cash EPS

3.8

3.9

5.7

6.6

8.2

DPS

0.2

0.0

Book Value

14.5

16.8

20.5

37.6

43.5

Returns (%)

ROCE

12.1

12.2

13.8

14.8

15.6

Angel ROIC (Pre-tax)

12.3

12.5

14.0

15.6

16.6

ROE

15.7

18.4

17.9

12.2

13.6

Turnover rati os (x)

Asset Turnover (Gross Block)

4.4

4.5

5.0

5.4

Inventory / S ales (days)

179

160

161

160

Receivables (days)

Payables (days)

Working capital cycle (ex-cash) (days)

208

188

187

186

February 12, 2018

LT Foods | 3QFY2018 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration numb er

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/dealing in securities Market. Angel or its associates including its relatives/analyst do not hold any financial interest/ben eficial

ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /

managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst

has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity

of the company covered by Analyst.

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Disclosure of Interest Statement

LT Foods

1. Analyst ownership of the stock

2. Angel and its Group companies ownership of the stock

3. Angel and its Group companies' Directors ownership of the stock

4. Broking relationship with company covered

FeNote: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Based on expected returns

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)