Shares of Baba Ramdev-backed Patanjali Foods make headlines for violation 50,000 cr market cap and new 52-week high 1,415 on BSE. However, the stock retraced from its 52-week high and is now available at a price of Rs. 1,343 per share. HDFC Securities sees this retracement as a buying opportunity. Brokerage believes Baba Ramdev-backed FMCG stock may go up 1,602 each level in the next two quarters. This means that HDFC Securities believes that the stock may see a jump of around 20 per cent in the next six months.
on the evaluation of Patanjali Foods ShareHDFC Securities says, “The powerful competitive edge that PFL enjoys from Parentage, given its strong brand equity, pan-India distribution network, its capabilities and product synergies, is further enhanced by the company’s acquisition of Patanjali’s Whole Foods portfolio. In the medium term, we expect the company to witness a transformation from a commodity based company to a large FMCG and wellness company by focusing on key strategic priorities, where all BUs and functions work in a coherent manner to achieve the larger objectives. We invest in talent and capacity building, focusing on leveraging digital technology, instituting a stringent corporate governance framework. With these building blocks, we believe PFL accelerated growth and growth. We are well positioned to continue creating value for our shareholders.”
“In the near term, the company’s focus will be on consolidating existing business segments, increasing market share and profitability, while venturing into new synergistic segments that are strategically aligned to drive business profitability. Going forward, we expect 22% CAGR growth in its revenues is largely driven by the food business, which is expected to grow around ~4x due to the recent acquisitions and scaling up of the same. This will lead to the food business in FY24 Oil business expected to grow at 14% CAGR in FY22-24E with higher realizations expected to grow by around 20%. 14% in FY22. Volume growth expected to be in mid-single digits and better than industry growth Because it is piggybacked on Patanjali’s vast distribution network,” the brokerage said.
Since the acquisition of Patanjali in FY19, the company’s margins have grown from 1% in FY22 to 6.1%. Going forward, we expect margin expansion of 46 bps in FY 22-24 due to increased contribution from the food business and better realization of synergies. Higher revenue growth, improved profitability and lower finance cost could drive PAT growth at 43% CAGR in FY 22-24E.
On its recommendation to situational investors with regard to the shares of Patanjali Foods, HDFC Securities’ report said, “Given the predominance of oil business even after 2 years from now, the valuation of PFL may still be lower than its counterpart FMCG companies. However, it may grow much faster than its competitors over the next two years. We have taken this into account when arriving at the price target. We think the stock’s base case is a fair value 1490 (32.5x FY24E EPS) and the bull case is reasonably priced 1602 (35x FY24E EPS). Investors can buy into the stock Add more on 1341-1363 band (29.5x FY24E EPS) and fall 1180-1200 band (26x FY24E EPS) band.”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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