Company Name- Anjali Foods
- Market cap- 83 Cr
- PE- 62
- Dividend yield- 0%
- PEG-1.16
- Debt to equity- 0.60
Company Background-
AFL is a part of Anjani Vishnu group. It is a bakery retailer & distributor. It produce different varieties of cookies, cakes and breads. The brand Fresh Choice has and will continue to have a very unique model which is to operate company owned retail stores that oer a wide range of product categories that include baked items, desserts, cakes and beverages; along with distributing certain product segments that can be classified as packaged foods to modern trade and general trade outlets. The brand as a whole
intends to position itself in such a manner that the company operated retail stores can
leverage on the strengths of the packaged foods division and vice-versa.
The brand Fresh Choice is an established brand in the cake segment in rural and towns of Andhra Pradesh region. AFL manufactures different varieties of cookies, cakes and breads. The management is planning to expand its operations to Tamil Nadu mainly concentrating on smaller cities like Coimbatore, Salem and Trichy
Company has more than 60% market share in visakhapatnam.
Stores and Geography :-
With outlets spread across 5 districts from Srikakulam to Godavari. Presently, under the Fresh Choice brand, there are 18 company owned outlets in various formats and sizes. In terms of the geography of these retail outlets, currently these outlets are
present across both the Telugu states. However the Plan for FY23-24 is to open around 4 outlets, all company owned; across towns in A.P. Also, revamping of 2 existing outlets will be taken up to further enhance the sales and customer experience. Compared to FY21-22, the revenues for retail went up by 21.5% in FY22-23. Similarly for FY23-24 the revenues are projected to grow by 30%. Currently company is genrating 40% of its revenue from retail stores.
The company has been building on its presence in the East and West Godavari districts also. Packaged foods via distribution channel contributed to about 60%
of the overall sale of the company whereas company operated retail stores contributed to 40% of the sale. The company is oering a wide basket of products to retailers and customers.
Manufacturing & Raw Material :-
The manufacturing units of the company is strategically located in Modavalasa village near Visakhapatnam with which provides logistical advantage to the company. AFL procures most of its raw material like maida, sugar and atta from local farmers/processors located in and around the unit. Considering the growing demand for AFL’s products and scale of business, and for the ease of trade, company is setting up a new production facility in Peddapuram with state-of-the-art machinery with Japanese Technology which will help increase production and further provide logistical advantage for sale in East Godavari which is a great untapped market for AFL. Moreover, the company has established two centralized kitchens in Hyderabad and Visakhapatnam to manufacture Cakes, Pastries, Cupcakes, Pancakes, and few other products to provide fresh and delicious products to their customers. The company has its own cold storage vehicle which helps in logistics by transporting from centralized kitchens to their retail outlets and the company hires the cold storage vehicle if their own vehicle is in transit.
Capacity utilisation has reached around 90% and further investments are planned for to enhance the scope of packaged foods division. Decision to invest in a new manufacturing unit to increase the capacities has been taken and it should take into eect as early as January, 2024; this should increase distribution radius significantly by catering to the densely populated districts of East Godavari, West Godavari, Krishna and Guntur. **
Also this would help in doubling company present distribution top line by almost two times and the aim is to achieve this by the 3rd quarter of FY 24-25.
Products and Raw material-
Company is in Breads & Buns, cakes and Desserts and other products.
Company currently has 100% of its revenue from Bakery products.
This year, the brand has ventured into the frozen dessert space which encompasses products such as gelatos/ ice cream cakes and other ice cream based desserts. Investments have been made to take the ice cream to select modern trade outlets too. The other segment that we have added to the product range at the retail outlets is the traditional Indian sweet. Currently this product is being sourced from manufacturers in the North.
**Positive and negative points for me **
Negative
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AFL operates in the industry where the requirement of working capital is very high. The company manufactures different varieties of cookies, cakes and breads. The average collection period stood at 10 days which is better than its competitors. However, the working capital cycle of the company though deteriorated from 14 days in FY22 to 22 days during FY23 due to increase in inventory levels remains comfortable.
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Company has posted continues loss from 2014 till 2018.
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Since in this industry many entrance is simple any company can enter with less capital and its a buyer market its risk to hold client loyalty as many big players like britania and ITC are avaialble in market.
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Company has high debt at current level. Not serving the debt can lead to very catastrophy outcome for company. No mangement comments on repayment of this loan.
Positive
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Promoter holding has been constant 75% since years. which is very positive for compnay like this which is below Rs 100 cr
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Company seems very focus and strategy proceeding with expansion.
Currently company neither undervalued nor it has predictable revenue and profit to forcast. Very risky at current market cap and valuation.