The shares of Sanwaria have halved in value over the last few months, from levels of Rs 32 to Rs 13.60 (face value of Re 1). At these levels the stock of the company becomes a very decent pick and let us see some reasons for the same.
Becoming a significant player in the FMCG business
The company has transformed itself from a mere player in the soya business, to a larger FMCG player, with turnover now in excess of Rs 5,000 crores.
The company's product portfolio now includes Basmati Rice, Refined Soyabean Oil, Refined Rice Bran Oil, Chakki fresh Atta, Chakki fresh fortified Protein & Iron rich Atta, Maida, Suji, Rawa, Besan, Daliya, Pulses (Dals),Soya Flour, Soya Chunks (Bari) Salt, Sugar, Poha, Soya Meal, Rice Flour, etc.
Tie-up with Patanjali and online sales to boost revenues
The company has reputable brands like like Sanwaria, Narmada, Sulabh and Nashira. Sanwaria is in the process of opening a branch in Dubai to cater to the Middle East region.
To widen its reach it has also opened "Sanwaria Consumer Shoppy" outlets to supply directly to end consumers. It is looking for tie-ups with online retailers like Groffers and Big Basket. The company has entered into an agreement with "Patanjali Ayurved Limited" to manufacture and supply Soya Chunks or Soya Bari in the "Patanjali Brand". All of these initiatives are likely to benefit the company in the years to come.
High promoter holding and improved margins
The company is looking at changing its product mix, which should boost margins, along with the several initiatives mentioned above to boost sales. The promoters have a very high holding in the company of 65 per cent.
Another good initiative that the company is taking steps to reduce its debt. Recently, capital was raised to retire debt to the tune of Rs 100 crores.
Fundamentally a good stock to own
We believe that Sanwaria Consumer is on track to report an EPS of Rs 1.5 by 2018-19. This means the stock is available at a p/e of just 8.66. If we discount the stock at a p/e of 20 times, given the growth potential the stock should double in price in the next one year. Hold for the long-term to reap good returns.
Strong promoter holding, several initiatives to boost revenues, reduction in debt and increased margins are good reasons to buy the stock.
This article is strictly for informational purposes only. It is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Sanwaria Consumer.