Buy IFB Agro Industries; target of Rs 198: Angel Broking

Angel Broking is bullish on IFB Agro Industries and has recommended buy rating on the stock with a target of Rs 198 in its March 25, 2013 research report.
 
“IFB Agro Industries (IFB), primarily present in West Bengal, is engaged in the business of manufacturing alcohol, bottling of branded alcoholic beverages as well as processed and packed marine foods, both for domestic and export markets. The company’s expansion plans in the liquor segment coupled with scope for higher market penetration are expected to drive growth. IFB’s presence in marine business provides ample opportunity in the domestic as well as export markets due to the niche product categorization and presence of fewer competitors. Moreover, the recent preferential allotment, where the promoter has pumped ~Rs 18cr (~13 percent of the current market cap), reflects promoters’ confidence in the company. We initiate coverage with a Buy recommendation on the stock with a target price of Rs 198.”
 
“In India, the per capita consumption of alcohol stands low at 1lt p.a. As per ASSOCHAM, India’s alcohol consumption is expected to grow by 30 percent annually till FY2015. This provides ample growth opportunity for the alcohol industry. Thus, IFB’s new bottling and manufacturing capacity would complement the potential consumption opportunity and thereby facilitate revenue growth going forward. In addition, IFB is the only distillery player in West Bengal which would add to the company’s growth prospects. IFB is a major player in the marine business (90 percent prawns) in West Bengal with presence in domestic as well as export markets. The company also has a tie-up with Thailand’s C.P. Group for supply of feed to farmers. We believe there is huge potential for the company’s marine business, given the company’s strong customer base, rising demand for frozen sea food, and overall global economic growth which again will spur demand. IFB’s preferential allotment of 9,98,000 shares in February 2013, amounting to ~Rs 18cr (on a market capitalization of Rs 136cr), raised the promoter holding from 55 percent to 60 percent which is an indicator of the promoters’ confidence in the company. This has consequently resulted in improved investor confidence.”

“We expect the company to post a CAGR of 19.5 percent and 15.1 percent in IFB’s revenue and net profit, respectively, over FY2013-2015. The company plans to raise debt for expansion of its distillery unit which is expected to be operational by FY2015. EBITDA margin is expected to improve by 149bp over FY2013-2015 to 12.9 percent in FY2015 from 11.4 percent in FY2013 owing to discontinuation of low margin businesses and better operating efficiencies. At the current market price, the stock is trading at a PE of 3.8x its FY2015E earnings and P/B of 0.6x FY2015E. We initiate coverage on the stock with a Buy recommendation and a target price of Rs 198 based on a target P/E of 5.0x for FY2015E,” says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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