"At the current market price of Rs 1419 (P/E of 95x on trailing 12 months EPS), the stock already discounts the growth story and is too expensive. There is no comfort on the valuation front," says Akash Jain, Vice-president, Equity Research at Ajcon Global Services.
The Indian market for snacks is expanding and turning itself inside out to keep in step with an expanding set of consumers, who are not only eating healthy and munching local, but are also increasingly choosing branded over unbranded fare.
Leveraging the trend is Indore-headquartered Prataap Snacks that has in the past eight years transformed itself from a single-product company to one with multiple branded savouries in its portfolio. The company has moved quickly to position its Yellow Diamond brand as a home grown challenger to rivals such as PepsiCo (Frito-Lay), Parle and Balaji. The Company has grabbed reasonable share in the Extruded Snacks space through its product innovations.
The Company witnessed revenue CAGR of 27 percent over FY13-17. The Company has a big opportunity of Rs 22,000 crore in the organised snacks market in which it can grow esily at 18-20 percent rate amiodst competition. The company is putting efforts on improving margin-profile of the Namkeens portfolio.
The company’s entry in to the sweet snacks category through the launch of Yum-Pie needs to be tracked closely as well. It can possibly get some traction on account of pricing strategy and focus on tier 2 cities/hinterland, just as in the case of savoury segment. This category is otherwise getting contested by large players like Lottee and ITC, particularly, in tier 1 cities.
However, at the current market price of Rs 1419 (P/E of 95x on trailing 12 months EPS), the stock already discounts the growth story and is too expensive. There is no comfort on the valuation front.Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.