Buy Agro Tech Foods; target of Rs 620: AnandRathi

AnandRathi Securities is bullish on Agro Tech Foods and has recommended buy rating on the stock with a target price of Rs 620, in its April 30, 2013 research report.

The report says, "Agro Tech reported 17.2 percent yoy revenue growth; of that, volume growth contributed seven percentage points, the rest was price led. Sundrop recorded 10 percent volume growth, peanut butter registered 50 percent revenue growth. The foods business (ACT II Popcorn) posted 20 percent volume growth and reported 10 percent pricing-led growth. The EBITDA margin came at 9.9 percent yoy. The company's gross margin expanded 170bps and it increased ad-spend by 140bps yoy. The effective income-tax rate was down 20bps yoy. Net profit was up 13.6 percent yoy."

"The company has announced a buyback of 1m shares at Rs 520 each by tender. Agro Tech has shares in an ESOP trust of Rs 300m; it plans to sell them by Jun'13 and use these funds to buy back shares. The rest of the funds required would be raised through internal accruals and short-term debt. As no major capex has been planned for FY14, the company plans to raise shareholder returns by way of the buyback. The acceptance ratio for the buyback works out to 8.5 percent."

"The company has rolled out ACT II Ready-to-eat Popcorn in Rs 10 and Rs 15 SKUs. These packs are able to catch more consumers, resulting in higher growth. Agro Tech has also launched a Rs 90 pack of Sundrop Edible Oil, which is helpful to deepen penetration and attract more consumers to the Sundrop brand. It expanded distribution by 50,000 retail outlets in FY12 and FY13, and plans to expand it by a similar figure in FY14 as well. We value the stock at a price target of Rs 620, at a target PE of 27x Sep'14e earnings. Risks: Higher raw material prices and an increase in competitive pressures. Buy the stock for a target price of Rs 620," says AnandRathi Securities research report.

Shares held by Insurance Companies

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

Read More