Domestic brokerage Motilal Oswal initiated coverage on small-cap rice producer LT Foods, seeing a bullish outlook on the company on its strong market share, international growth plans and growing consumption for basmati products.
The brokerage assigned a target price of Rs 520 per share, which implies an upside of around 36 percent from the current levels.
"LT Foods has transformed Indian rice from a loose commodity to a branded product with notable brands like Daawat and Royal. With a market share of ~30 percent in India and
~50 percent in the US, the company has diversified into organic foods and aims for double-digit growth," said the brokerage.
At 9.35 am, shares of LT Foods were quoting Rs 430.7 on the NSE, around two percent higher from the previous session's closing price.
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The brokerage added that Basmati rice, while comprising only four percent of India's domestic consumption, drives significant export revenue. Therefore, LT Foods, being the key Indian player, stands to gain with increasing penetration of basmati rice globally.
The firm has recorded a 17 percent CAGR in international revenue over FY19-24. Its strategic expansion in the US and Europe drives growth, while the Middle East has rebounded with a remarkable 26 percent surge in FY24.
Over the last five years, LT Foods rerated from ~8x P/E to ~21x (in FY25), fueled by strong cash flow generation, consistent performance due to product and geographical diversification, and improved RoE/RoCE.
As a result, Motilal Oswal believes the firm will record a revenue/EBITDA/PAT CAGR of 14 percent/15 percent/19 percent over FY24-27.
Over the past year, shares of LT Foods have seen a stellar run, galloping almost 100 percent in trade. In comparison, the frontline index Nifty 50 recorded gains of around 25 percent during the same time.
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