Guidance for 10-12% CAGR till FY25 with margin expansion. 9M-24 performance in line with guidance. At reasonable PE valuations and attractive cash flow yield.
1. Selling Basmati & other rice with other food products
ltgroup.in | NSE : LTFOODS
Basmati Rice: According to AC Nielsen, our market share in India has surged by 160 basis points to 30.2%, while the market share in the Americas has witnessed a growth of 1.6%
2. FY19-23: Strong PAT growth even though revenue growth has been tepid
3. Strong FY23: PAT up 37% and Revenue up 28% YoY
4. Strong H1-24: PAT up 55% & Revenue up 13% YoY
5. Strong Q3-24: PAT up 52% & Revenue up 9% YoY
6. Strong 9M-24: PAT up 54% & Revenue up 11% YoY
7. Business metrics: Solid return ratios
- The Return on Capital Employed improved to 20.3% in 9M FY’24 compared to 16.2% in 9M FY’23.
- The Return on Equity improved to 18.7% for 9M FY’24 compared to 16.9% in 9M FY’23.
8. Outlook: 10+revenue growth in FY24 with PAT growing faster than revenue
i. FY24: Double digit growth
Management is guiding for a double digit revenue growth in FY24 which is in-line with the 9M-24 growth of 11% and also in line with the 10-12% revenue CAGR till FY25.
double digit growth
ii. Bottom line to grow faster than top-line on account of margin expansion
9. PAT growth of 54% & Revenue growth of 11% in H1-24 at a PE of 12
10. So Wait and Watch
If one holds the stock then one may continue holding on to LTFOODS
- Coverage of LTFOODS was initiated after Q2-24 results. The investment thesis has not changed after a strong Q3-24. The delivery of a strong 9M-24 has increased confidence in the management to deliver a stronger FY24 compared to FY23
- LTFOODS has a solid track record of growing its bottom line (30%+ CAGR for last 5 years) even though top-line growth has been tepid (15%+ CAGR for last 5 years). The trend is expected to continue with management guiding for a 5 year revenue CAGR of 10-12% with with EBIDTA margin expansion over the 5 years.
11. Or, join the ride
If I am looking to enter LTFOODS then
- LTFOODS has delivered PAT growth of 54% & Revenue growth of 11% in 9M-24 at a PE of 12 which makes valuations reasonable.
- LTFOODS is trading at market cap of Rs 6,827 cr which is less than the FY24 expected revenue of around Rs 7500 cr
- LTFOODS delivered Rs 380 cr of free cash flow against a market cap of Rs 6,827 cr. As of 9M-24 end it is available on a free cash flow yield of 5.6% (not annualized) which makes the valuations quite attractive.