Buy This Multibagger Agro Foods Stock For Target Price Of Rs 1,750, Soon To Trade Ex-Dividend

The report by ICICI Direct on Patanjali Foods Ltd. (PFL) published on September 20, 2022, has rated "buy" for a target price of Rs 1,750 apiece. It has a market cap of Rs 50,585.16 crore. PFL is one of the largest edible oil companies in India with oilseed extraction (mustard, soybean & others) & refining capacity of 3.9 million tonnes per annum (MTPA).

The company has a good dividend track report and has consistently declared dividends for the last 5 years. Recently, the company's board of directors announced a dividend of Rs 5 per equity share i.e, 250% for the financial year 2021-22. The ex-dividend date will be September 23, 2022.

Stock Outlook

The stock's current market price is Rs 1,467.25 apiece on NSE. It was opened at Rs 1,459.90 apiece. The recorded 52-week low is Rs 700.05 apiece, while the recorded 52-week high is Rs 1,467.25 apiece.

According to the Rs 1,750 apiece target price and the current market price, the stock is likely to gain 20% in 12-18 months.

Returns over the past 5 years

The stock has given 5% in a week. In the past 3 months, it has given a positive return of 24.69%. In the past 1 year, the stock has given a positive return of 33.38%. The stock has given multibagger whooping returns in the past 3 years, around 30,278.26%. In the past 5 years, the stock has given multibagger return of 5,603.67%.

 

Business Update

Revenue, earnings grew at CAGR of 35.8%, 89.6%, respectively, in FY20-22.

PFL repaid entire debt in April 2022 from the proceeds of FPO in March 2022.

Key triggers for future price performance

• PFL has 3.9 million tonnes (MT) of oilseed crushing & refining capacity with current utilisation of 40%. The company would be able to increase capacity utilisation by leveraging its existing & Patanjali brand to drive volumes.
• Acquired foods business of PAL commands 16% operating margins with high sales contribution of ghee, juices, atta and honey. With consolidation of foods business, overall margins of the company to see an uptick.
• Backward integration in palm plantation is likely to reduce its dependency on imported CPO. Moreover, expansion in palm extraction capacities by the company would help in improving margin in the edible oil business in the next three to five years.
• The combined distribution network of PAL & PFL has expanded the company's reach to 1 million retail touch points. Further, its products can be promoted & advocated through more than 3000 Patanjali health centres.

Buy for a target price of Rs 1750

PFL's share price has gone up 34% in last one year. "We initiate coverage on PFL under Stock Tales format with a BUY rating and a target price of Rs 1750/share. We value PFL at 40x FY24 earnings to arrive at a target price of Rs 1750/share," the brokerage has said.

Business Overview

Patanjali Foods (PFL) is one of the largest edible oil companies in India with oilseed extraction (mustard, soybean & others) & refining capacity of 3.9 million tonnes per annum (MTPA). This includes seven standalone coastal refineries for processing imported crude palm oil (CPO). PFL also has a sizable food business, which includes soya chunks & soya flour under 'Nutrela' brand. It acquired the biscuits, noodles and breakfast cereals business from Patanjali Ayurveda (PAL) in May-June 2021 and remaining foods business portfolio of PAL in July 2022, which includes Rs 4173 crore of sales through products under categories like cow ghee, edible oil, honey, Chyawanprash, atta, pickles, juices, jams & ketchup. The company also forayed into nutraceutical and wellness products in FY22.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.