I agree it’s not a commodity. Daawat is a superior brand for households. However I am trying to understand the reason for low pe ratio. I understand low pe for krbl is due to corporate governance issues and ED cases. Could someone throw some light as to whether there are any corporate governance issues for Daawat? Else, what could be the reason for low pe?
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Nice history on GI Tag.
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There is an insurance claim of 134 Cr which is recoverable. If not recovered - there could be provision to the tune of that. But its quite an old matter. Not sure, when it would resolve. In the recent con call they said - its delayed because of covid issue and court matters are delayed.
However, now considering the size - this amount would not have significant impact. But yes, something to be kept in mind.
why there is abnormal change in following ratios - Inventory Days, Days payable, Cash Conversion Cycle last few columns.
Source: Screener.in
1…Receivable days is more important than payable days…Receivable days is decreasing that is good sign
2…Inventory is increased in 2021 that may be because company itself doing for aging of rice or may be low utilization in pandemic
3…As money is stuck in inventory, cash conversion
cycle has increased.
I think it is nothing to worry about
I normally see
1…Receivables as % of sales in last 5 yrs
2…Inventory as % of sales in last 5 yrs
But as LT foods is in basmati industry, increasing inventory has not so significance
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Thanks.
however, a sudden spike in inventory days can’t be a bad sign …as in market mein inka product is not getting sold as fast it was happening.
Also,
how do you see/check ?
1…Covid has affected HORECA segment which contributes sizable portion of revenue for LT foods.
That meight be reason for increased inventory
2…See receivable in balance sheet and sales in P and L
for perticular year and calculate receivables as % of sales.
Then compare last 5 yrs
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Such a jump in inventory can be for two reasons - 1. Tremendous slowdown in sales or 2. Deliberate buildup to push sales. Basmati requires rice to be stored for 2 years before being sold. Carrying cost would be at least 16-20% for this period. LT Foods has OPM of 11%. So this is a double edged sword. If the selling prices are not favorable there can be a drop in profits in or the Company may actually get into next orbit of sales trajectory.
Hi. Great analysis! Couple of my learnings from being invested in KRBL that I wanted to share with you & even discuss:
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Everyone is doing branding. No one is successful : Even KRBL tries to brand themselves so they can get pricing power. No player has been successful. Mostly because it’s not easy to build a brand. It takes considerable time and knack. I will not call brand to be a growth driver for either players.
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Low Middle East exposure is a big concern - ME is highest consumer of Basmati Rice esp. during Ramadan. In this region, KRBL has high share. Even US, Europe is fractional of ME demand
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Op/Gross Margins: Noticed KRBL is considerably higher than LT foods. I think two things could be driving it - Low Debt & contract farming which gives a cost advantage.
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It is not like that
1…Krbl and lt foods both have good brands.
Krbl grows by margin while lt foods grows by increasing turnover of branded rice ,value added products and new products .
2…Krbl has 19% and lt foods has 11% operating margin.It is due to premium valuation of india gate over Daawat due to higher inventory period of india gate .So here Krbl has strong moat over lt foods. But corporate governence is big risk in krbl.
3…Debt portion is not included in operating margin.
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Good Points @AshKrish; On your thought about middle east region business. I can see a great change in lifestyle especially the consumption of Basmati rice here in middle east. The changes happening in Saudi at least is steadfast, moving away from traditional gatherings, where they used to arrange mammoth feasts.
Middle east in general is adapting into openness and female moving into workforce and the culture of fast food is the new norm. Mostly the open feasts are changed into buffets and packed foods where the rice consumption is reduced in general. This might be just my gut feeling, but in the long run it may have impacts in consumption of rice especially in Basmati. KRBL has about 30%+ revenue from middle east right and all of it from Basmati only…?
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The reason for the inventory jump is the depressed price(not enough buyers even at this cheap price) and that is lending to the slowdown in sales.
DIS: own rice mill plant in Gujarat.
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Interesting point. I am wary that these trends typically take decades before there is a noticeable change. Partially offset that as world becomes more globalised, people from Middle East migrate and start consuming rice across the world as well. Having said that, KRBL still seems to have been battered by inflation, corp governance issues. At this point, I am not sure which way it would take for either KRBL or LT foods.
Kripal ji
I think older the rice better it becomes. so can this situation be termed as short term pain, long term (could be) gain.
Yes, you’re partly right. There is some rice that you can not store for more than 1 year because they lose its fragrance and aroma(Ex. Krishna kamod rice) Krishna kamod rice is available half the price of last year No rice miller wants to touch it because not enough demand in the market. LT Foods majorly trade Basmati which develops the aroma after a few years of storage(1-2 years). Because of some temporary export restrictions, the overall demand for rice has declined. No idea when the cycle will turn but if you have patience, sooner or later it will reward you!
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Hi, Was there an earnings call for Q3 FY22. I couldn’t find the transcript from the website. I could find the transcripts for all earlier earnings calls. Kindly can someone let me know why a call hasn’t been conducted for Q3?
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