Buy Lakshmi Energy & Foods, tgt Rs 300: IIFL

IIFL has recommended a buy rating on Lakshmi Energy and Foods with a one-year target price of Rs 300 in its June 9, 2008 research report. "Lakshmi Energy and Foods (LKEF) is the largest non-basmati rice processing company in India, with a market share of 1.2%. The company is looking to transform itself from a rice processor for the Food Corporation of India (FCI) to a direct retailer of branded rice, on which EBITDA margins are 500bps higher. Rapid capacity expansion (22% CAGR) over the next four years should allow the company to consolidate its position."

"LKEF is also looking to integrate vertically, to benefit from the high margins offered by processed by-products. We expect a 35% revenue CAGR and 41% EPS CAGR over the next two years, driven by volume growth and margin expansion from sale of branded staples and by-products. We recommend BUY with a one-year target price of Rs 300 (8.7x FY10ii EPS)," says IIFL's research report.

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