Agro Tech Foods - A small cap MNC foods FMCG


(ranvir dehal) #21

Read the latest concall of the company-

A few takeaways from my side-
1. Scale up and the pace of scale up of peanut butter, nachos, Act II (ready to eat pop corns) and sundrop peanut snacks are the key data points to monitor in future. And of course their market acceptability. .

2.Second item to monitor closely monitor is the pace of distribution expansion.

If these things pan out smoothly, we ll have a winner on our hands.

Sundrop Oils and Act-II (ready to cook popcorns) are doing fairly well.

Keeping a close watch on these parameters. May initiate a small position as well.


#22

All numbers can mislead as company is in investment phase. They are building factories and distribution network across India.

At 1200 cr there you have a handful of successful brands. There is multi-decade opportunity for this company.


(ranvir dehal) #23

AGREE.

If they get their act right, which I hope they will, it can be a superstar.


(v4value) #24

did you see market share numbers for sundrop? how is it doing well?


(ranvir dehal) #25

Hi v4value,

Yes the mkt share has slipped wrt Saffola and to some extent Fortune. However its volumes are growing and the catageory ( premium cooking oils ) itself is showing good growth. ( bcoz of people upgrading to better oils ).

It is just that it is growing slower than saffola and hence the aberration in mkt share.


(Gaurav Agarwal) #26

Hi @ranvir I also feel that branded cooking oil in all categories even bottom pyramid is replacing unbranded oil.

Even Pincon oil brand has shown very high growth, which surprised me.

Do you have some data source on this?


(ranvir dehal) #27

Here is one link- showing the growth in branded oils and fall in loose oil sales.

http://www.business-standard.com/article/companies/edible-oil-cos-increase-share-of-branded-packed-oil-to-fetch-premiums-116020400267_1.html


(Bhaskar Jain) #28

Agro Tech management is focusing on food business. They have clearly said that they are happy if Sundrop, Crystal oil sales remain as it is -- it is used to pay the bills of the company but focus is on the snacks business. So we should not invest in this company if your thesis is growth in branded oils. For the latter Marico is obvious choice.

disc - invested in AgroTech


(v4value) #29

Bhaskar my worry is if Agrotech loses share in Sundrop, teh only bargaining chip they have at distribution, how will they compete with an ITC suite of products? They will be neither here (oil) nor there (food)


(Bhaskar Jain) #30

We should remember that as a company AgroTech was a pioneer and started the retail popcorns business with its Act2 brand. We don't have any other big competitor in this business. Then they started Sundrop Peanut butter, tortilla chips and other bag snack products. Though there are few big competitors in these businesses including Doritos,ITC, regional players like Tasty Bites etc.
They can also bring-in other products from its parent ConAgra in the future. As a strategy I would also want them to concentrate equally on both the oil and foods business but they are very clear that their focus is on ramping the food business.

We should not expect any short or medium term gains with this stock. This stock/company will test our patience. My thesis behind investing is captured in my blog - https://indianvalueinvestorblog.wordpress.com/2016/01/24/agro-tech-foods/

disc - invested in AgroTech


(ranvir dehal) #31

Absolutely agree with Bhasksar.
Lets see how it goes. Patience shall be the key here.


(Mehnazfatima) #33


(Saket) #34

Short Summary of Q3 conference call:
https://goo.gl/8C8zwv
we have also prepared few other summaries. Sharing here: https://goo.gl/5RTk0o
To get mail alert for daily updated summaries, pls fill in mail id in form here: https://goo.gl/forms/rKVCPDBBdCSsUZHB3

Read disclaimer for summaries here: https://goo.gl/HELov8


(Jatin Soni) #35

http://www.livemint.com/Politics/jrgzpUNBiULghNE4yRGqvM/Indias-vegeteble-oil-imports-seen-flat-or-lower-for-the-fir.html

Cycle seem to be turning in favour of the company


(Mehnazfatima) #36

Agrotech foods was a Stalwart Advisors pick. They have now given exit recommendation because of lack of price movement was inflicting a loss of opportunity cost.

But technically, the stock is now under volatility compression on long term charts. A huge breakout seems to be inevitable in the next 2-4 months…

I am given to understand that this has been a Prof Sanjay Bakshi pick too…but not sure.

Anyhow, i have purchased a good qty of Agrotech foods…i find the downside risk to be quite limited to 450…and upside potential to be quite good. Fundamentally, the stock continues to remain a good pick.


#37

Are these guys momentum advisors. First time I am hearing that lack of price movement is a criteria for fundamental analysis.


(Mehnazfatima) #38

No…the stock price is stagnant since two years…that too in a bull market. Hence, they have given an exit call. They say that the fundamentsls story continues to be good.


#39

Can you please share some more details from their report?


(Sandeep Patel) #40
  • ATFL has done nothing in last 5-7 years would be the first impression one will get at a quick glance.
  • Peel the onion and one can see a very slow transformation towards Processed Foods business (focus area of ATFL).
  • Processed Foods revenue contribution: Up from 14% in 2012 to 22% in 2017 (major revenue still comes from Edible oil segment - Sundrop and Crystal).
  • ATFL intends to clock 50% of their business from Processed Food. Invested new capital in this segment.
  • Snacks market size: Expected to grow from $2bn to $5bn in 5 years. ATFL plans to benefit from this consumption growth.
  • Processed Foods: ATFL gaining traction in Sundrop peanut butter and Act II consumer segment.
  • Processed Foods clocked ~175cr revenue in Fy17. Has capacity to do 450-500cr (<40% capacity utilization currently).
  • Processed Foods segment growth numbers is not coming out at a quick glance. It is masked by significant drop in vending corn & tortia segment; down to ~10cr now (not much to lose going forward).
  • ATFL intends to target both i.e. Western snacks (through Act II brand) and Indian snacks (through Sundrop brand).
  • Western snacks have higher gross margin than Indian snacks. Unlisted Indian snacks co. (Balaji/ Haldiram/ Parle): EBIDTA 18% / PAT 7%.
  • ATFL has total 5 plants. Sixth plant (between Bangalore and Chennai - strategic location) should be up in middle of next year.
  • ATFL intends to widen the portfolio. Once you get mastery in this field, it is easy to widen.
  • ATFL is almost debt free. Not much capex plan/required. P/B ~3.4. Will generate ~50-60cr cash in Fy18. Trading at ~1250cr MCAP currently.
  • Do see Sundrop peanut butter and Act II consumer products gaining prominent rack space in supermarkets (my observation is limited to couple of large retail chain in Bangalore).
  • Investment thesis: Green shoots in Processed Foods number to gain momentum going forward. While maintaining current revenue in Edible Oil business. PAT has bottomed in Fy16; on gradual up move now.

Risks:

  • The anticipated growth in Processed Foods fail to materialize (medium probability).
  • Rapid de-growth in Edible Oil revenue (low probability).

Disc: Invested recently (minor allocation). Have been patiently nibbling around 500-520 level.


(s) #41

I share the views. The stock is cheap with low downside but capped upside till it actually is able to deliver on numbers. It has fatigued investors patience to a dropping point. The competition is hotting up with domestic and other foreign brands already establishing market presence. The management commentary during con call has always been positive but the realization in numbers is key to watch out for. My guess still a long way to become a visible FMCG player. Odds still in favour of the company for the price is still a bargain at CMP.