Freshtrop Fruits Ltd


(Jatin Soni) #1

About it

http://castlegatecapital.com/upload_emerging/530077.pdf

Company has 10% market share of Total Export from Indian market to EU and only listed entity

from grapes exports to food processing unit

http://articles.economictimes.indiatimes.com/2008-02-04/news/27720773_1_fruit-juices-pomegranate-juice-fresh-fruits

Export market got hit due to ban in exports to europe in 2010 http://articles.economictimes.indiatimes.com/2011-06-01/news/29608374_1_grape-exports-export-price-domestic-market

http://articles.timesofindia.indiatimes.com/2012-09-17/nashik/33901865_1_grape-export-grape-season-total-grape

External Addressable Opportunity

There are around 152 grape exporters. Of these, nearly a 100 exporters received a major setback in 2010 due to Europe rejection of consignments following the alleged pesticide incident. Of the 152, only 42 grape grower exporters survived and have been exporting grape for the last two years. The government must therefore take efforts to revive the dwindling businesses of exporters hit by the 2010 crisis. Presently, our maximum export is to European countries. We largely depend on European market. Finding out and researching newer markets is therefore the need of the hour in order for us to lessen our export dependency on the European market. As GEAI president, what are your priorities? Presently, India exports only 3% per cent of total grape produced in the country. This proportion is less compared to the production. My priority will be to increase the export from 3% to 10% of total grape production in the country by continually following up with the government to open new grape export markets. Efforts will also be taken to sort out all pending issues with the state government related to grape growth, production, packaging and export. and

http://www.supportbiz.com/articles/top-story/germany-resumes-import-indian-grapes.html

Now the company is seriously looking at Domestic market.

http://www.freshtrop.com/pdf/Annual%20Report%202010-11.pdf

http://www.freshtrop.com/pdf/Annual%20Report%202011-12.pdf

Domestic sales growing at 50% yoy , but still not profitable.

Co. owns land worth 2 crs. , Building worth 11crs. and Plant worth 24crs. gives enough MOS. as total marketcap is 16 crs.

Q1 best quater for them due to seasonality and 75% of sales come in this qtr alone. This Q1 sales already 41crs. ( Season time of export ends in April) and pft 2.5crs. !!!


(Subash Nayak) #2

Hi Jatin,

The issue I see with it is that is a very low ROE/ROCE business (0-6), and with a very high DE ratio of 0.62. To add to it, its last 4 years earning are swinging like a pendulum. Again it is in agriculture space, so highly dependent on rain god and pests. Along with come regulations from export territories. They don’t seem to have any moat, differentiating business model either.

May be it is a pure cash bargain, which I am not an expert on.


(Ayush Mittal) #3

Hi Jatin,

I had invested into this co few years back. It was doing very well at that time but then things went wrong for them…1. the natural risks with the business 2. The ban by some euro countries and then the diversification into the food processing space (where nothing much has happened till now).

I do have regards for the MD as he was one of the first movers in the industry and seemed to have done several innovations.

At the current valuations, one should keep a tab whenever a turnaround seems to be taking place.

Ayush

Disc: No holdings.


(onefoothurdle) #4

Hi Ayush,

The company seems to be generating more profits now and have given a dividend also. What do you guys think of it now? its still a very seasonal business. Would also love to know about the MD that you seem to know about

Thanks a lot


(onefoothurdle) #5

I don’t know much about the MD and other people involved but I saw that they have been diluting and issuing shares rather significantly in the last few years


(Ayush Mittal) #6

Hi Mukul,

There was a good article in ET sometime back (shared onhttp://www.screener.in/talks/) which pointed towards signifacant improvement from Europe and hence better times for Freshtrop.However, this season saw unusal hailstrom in Maharashtra and the crop got affected…otherwise they would have done very well.

I feel the company has come out from its worst and may do well in coming times. However, one must remember that the business is quite seasonal and prone to some issue or the other.

Regards,

Ayush

Disc: I hold


(Vivek Gautam) #7

How beneficial will be recent removal of fruits n vegetable from APMC step by Modi govt for this co ? Can it now directly cheaply access from farmers n export it’s product?


(Aksh) #8

Though there are positives with regards to demand situations in Europe and lifting of the ban, I think it has been quite on and off depending on their economic situations and their stringent rules and regulations…this year they banned mangoes…apart from this, there are other exporting countries like Chile whose late season affects demands of our fruit products because of overlapping supply, putting price pressure and affecting margins…which makes this business quite volatile…Even this year’s bad monsoon with rising fruit prices would put pressure on the margins and overall supply.

Disc: exited


(Anmol Sharma) #9

This one is zooming too. 12% on friday.


(Nikhil gupta) #10

Results were out on Friday, and the company made more profit in Q1 than in the whole FY 14. The stock price zoomed 20%, and cmp is 57.35.

Despite the pendulum swings in pre 2012, the company has delivered some solid growth quarters recently, making it an interesting story on my radar.
Wanted to know from seniors, their opinion on the company.
Disc: not invested, but evaluating.

Q1 FY 15 Q1 FY 14 Full Year 13-14
Sales 69.8 Cr 57.7 Cr 113.6 Cr
Expenses 59.4 Cr 50.7 Cr 104.5 Cr
Net Profit 6.82 Cr 4.50 Cr 5.64 Cr
EPS 5.62 3.86 4.76

(Mahesh C) #11

Last June quarter profits were also high compared to subsequent quarters, may be just seasonal in nature because of some particular fruit season, good to confirm the details.

Thanks-Mahesh


(Nikhil gupta) #12

Yes, you are correct. March and June quarters are the biggest for the company. Rest of the qtrs, the company tends to report a mild loss. For Q1 and Q4, the company has shown continued growth in the recent times.

While reading the ARs, I noticed that company’s AR focused majorly on European grape exports, till last year, when the food processing unit became the main focus. Not sure, if this is anything to read into.


(J2EE Professional) #13

i know the business is seasonal, but can somebody explain why their sep and dec quarter is always in losses ? I have seen this trend for the last two years, which are supposed to be turnaround years? Any idea on this ?


(Ankit Gupta) #14

Hi,

If you study the company, it has two businesses:

1). Fresh fruit

2). Food Processing

Fresh fruit segment involves mostly exporting of grapes and the grape season starts from January and ends in June every year. This segment contributes around 80% of the top line and more than 100% of profit. That is why around 85% of their sales is in Q1 and Q4 of every year.

Food processing involves processing of food pulps primarily mango pulp, pomegranate pulp, tomato puree, guava pulp etc. Most of the sales in Q2 and Q3 is through this segment. This segment contributes the rest of the revenues for the company and is still in losses. When the company started the plant it was primarily for processing of pomegrante. However, the company faced issues on account of low availability of pomegranate. The management is trying to turnaround this business by adding second line of food processing and modifying the plant for processing more fruits which has been completed. As per Q1FY15 results, the company recorded its highest ever revenue and profit in a quarter from this segment. It will be important to monitor the situation during Q2 and Q3 and see whether the food processing segment has really turned around.

We have met the CS of the company and trying to get a meeting with MD. As and when it is done will post the detailed view about the company.

(Disclosure: Invested in the stock)


(J2EE Professional) #15

That makes sense. I am unable to find the brand name under which they sell their food processing products like mango pulp and pomegranate concentrate etc. Could you please point to that too (I didnt find anything on the website too)? Also, are they marketed in domestic and international markets both ? I agree its important that these units turnaround in the coming quarters or else, all the a lot good work of Q1 and possibly Q4 numbers are negated by these quarters.


(Ankit Gupta) #16

These are supplied to companies like ITC, Pepsi, Coca Cola etc and are not marketed directly. I would urge you to go through their ARs.


(J2EE Professional) #17

Any update from AGM today? Could anyone attend?


(chaitu) #18

It seems nobody attended.

I googled for AGM trascritps , but nothing is available so far.


(chaitu) #19

Even if they come out with 1-2 rs for Q2 and Q3 EPS. Stock will surely get re rated.


(Ravjit Singh Bagga) #20

I and Ankit Gupta attended the AGM, the management gave estimates of 140-150 cr revenues for this year and about 190-200 cr for next year which i think was very aggressive.

On the fresh fruit side they said that they can grow revenues by 10-15% and procurement of grapes was not easy… 70% of sales is directly to the super stores like Walmart and other stores and 30% is through some agents…

On the fruit processing side they have doubled capacity with a second line and can now process 2 fruits together. They are expecting good utilisation levels and look to turn in profits for the whole year.

They were cautious to give any targets as they said that both the businesses are not easy but were optimistic.