Buy Future Consumer; target of Rs 76: Motilal Oswal

Motilal Oswal's research report on Future Consumer

Future Consumer’s (FCL) net sales grew 51.3% YoY to INR8b (est. of INR7.7b) in 4QFY18. EBITDA rose 521% YoY to INR162m (est. of INR190m). The company reported a loss of INR36m (est. of profit of INR58m). Gross margin contracted 80bp YoY to 12.8% (est. of 14.1%), mostly due to faster growth in the lower-margin fruits & vegetables business.

Outlook

We, thus, value FCON on an EV/sales basis, assigning a multiple of 2.2x (60% discount to EV/sales of our coverage consumer universe). This results in a TP of INR76, implying ~36% upside from current levels. Maintain Buy. As soon as the company demonstrates profitability at the net level, we will move our valuation to P/E basis.