ADF Foods: A Healthy Recipe For Investors
Food processing is ingrained in India. Traditional Indian processed food items such as pickles, papads, chutneys and murabbas which use simple home-based preparation techniques have given India a distinct recognition worldwide.
According to the Ministry of Commerce, the Indian food processing industry accounts for 13% of India’s exports. Out of total industrial investments made in India, approximately 6% cater to the food processing industry. That said, only about 10% of India’s total agriculture produce is processed at present. This leaves tremendous scope for future growth.
No wonder, the food processing industry is one of the key industries promoted under the Make in India programme.
Stock market investors always scout for exciting investment opportunities in India’s leading and high-growth sectors.
Is there any investment idea from the food processing industry worth sharing at present?
Yes, is the answer!
Recently, ADF Foods Limited caught our attention.
ADF Foods is one of India’s leading ethnic Indian food companies. It derives 95% of its revenues from exports. The Company has two production facilities, one each at Nashik in Maharashtra and Nadiad in Gujarat.
After experiencing a muted growth between FY 2011 and FY 2016, ADF Foods is likely to post healthy growth numbers over the next three fiscals starting from FY 2019. In our assessment, from Rs 209 crore in FY 2018, Company’s net revenues will grow at a compounded annualised rate of 16.8% to touch Rs 333 crore by FY 2021.
The recent capex of Rs 12 crore will help the Company shore up the revenues from frozen food segment, which contributed around 30% of FY 2018 top line. We also expect, ADF Foods to report margin expansion, going forward. Depreciating Rupee might offer further tailwinds.
It’s a virtually debt-free company. The recent buy-backs reflect management’s confidence in the future prospects of the Company.
ADF Foods: Will it rally further?
The Company has a market capitalisation of Rs 520 crore. The stock is available at the forward (FY 2021) Price-to-Earnings (PE) of 13.5. With judicious use of capital and expected margin expansion, we expect ADF Foods to witness a significant improvement in return ratios.
We are hopeful that the overall good performance would reflect in the stock price action as well.
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company.
We do not individually or collectively hold 1% or more of the securities of the company.
We do not have any other material conflict of interest in the company.
We do not act as a market maker in securities of the company.
We do not have any directorships or other material relationships with the company.
We do not have any personal interests in the securities of the company.
We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships.
We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.