Q: What you like in Kohinoor Foods?

A: This is a stock which has been battered down a lot primarily because of the offloading of shares by Temptation Foods. The stock trades very close to its 52-week low of about Rs 41. This company besides rice is also into ready-to-eat foods. The company has got two manufacturing plants. The rice milling plant is located at Murthal, which is on the outskirts of Delhi, and the ready-to-eat plant is also located close to Murthal at a place called Bahalgarh, which is again on the outskirts of Delhi.

The plant at Murthal is suppose to be one of the largest in the country and it is spread over an area of about 36 acres and has a capacity to process about 50 metric tonne of rice per hour.

The plant at Bahalgarh, which is ready-to-eat food plant, can do about 50,000 packs of ready-to-eat foods per day and about 20 metric tonne of frozen food per day.

If you look at the brand Kohinoor is well-established in fact few years back it was selected as a super brand and it is probably the only rice brand in the country to be selected as super brand.

This company has got an excellent distribution network. They have close to 150 distributors, 600 stockiest and the product is sold at over 2.5 lakh retail outlets. Besides this, this company has got distribution network in place in more than 47 countries.

If you look at the financials of the company, first half of the current financial year sales are up by about 25% to Rs 350 crore, profit after tax (PAT) is up by about 80% to about Rs 10 crore. Management in a recent interview to a leading newspaper talked about achieving sales of about Rs 1,000 crore in the current financial year. Stock is trading at about Rs 47 at a market cap of just about Rs 130 crore.

To summarise, you have a company, which has got a strong brand. It is available very close to its 52-week low of about Rs 41 and significant discount to the price at which promoters increase their stake in the month of February. In fact, promoters increase their stake at a price of Rs 78, stock is available at Rs 47-48 and I think the 52-week high for the stock is Rs 115.

So it trades at a substantial discount to its 52-week high. Numbers – quarter-on-quarter (QoQ) have been quite good and I think the potential of the segment in which the company operates ready-to-eat food as well as rice, they are all driven by India’s domestic consumption story. So you have a company, which is trading at very sensible valuations and the product have got good potential and the downside looks restricted from the levels of Rs 47-48.