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.
3e67545e-8a2b-4ffe-ab9d-88c4e61339c8.pdf (378.1 KB)
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why there is abnormal change in following ratios - Inventory Days, Days payable, Cash Conversion Cycle last few columns.
Source: Screener.in
@Pragnesh can you help understand these numbers please?
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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LT Foods Q3fy22.pdf (1007.0 KB)
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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L t foods @ Concall may 2022
1…Performance
=Our consolidated revenue for Q4, FY’22, was up by 31% at INR 1,537 crore versus INR 1,169 crore in the Q4, FY’21.
=This is on account of increased sales from all three business segments, that is, Basmati and Other Specialty Rice, Organic Food and Ingredient Business and Convenience and Health segment.
=The Gross Profit was up by 27% from INR 404 crore to INR 515 crore due to change in product mix.
=The Company did an additional investment in brand and also there was increase in the freight cost by 3.5% that led to an increase in the other expenses by 40% versus last year.
=Our logistic cost during this year is INR 426 crore as against INR 287 crore last year. And in this quarter itself, our logistic cost is INR 140 crore. Last year, same quarter, it was INR 65 crore.
=The Company has generated significant free cash flows amounting to INR 373 crore up by 8% driven by strong performance in FY’22, that has led to decline in overall debt by 229 crore.
=The Debt-equity ratio improved from 0.7 to 0.5 times as the overall debt of the Company was down by INR 229 crore to INR 1,061 crore on yearly basis.
=Current ratio has also improved
significantly to 1.78 from 1.70 last year.
=Because of our continuous focus on the working capital optimization, our net working capital has reduced by 28 days to 207 days in financial year ’22 versus 235 days last year.
2…Growth
=Satisfying growth has come from all the businesses
=. Basmati and Other Specialty rice with a growth of 9%,
=Organic Food and Ingredient business with a growth of 19%, and
=Convenience and Health segments with a growth of 62% which is 2% of our revenue and has crossed a milestone of INR 100 crore and has reached to INR 121 crore.
=In terms of market share, our brands have grown at a faster rate than the market and there we’ve picked up market share. So in India, we’ve picked up almost a 1.5% share, and especially in the channels where the growth is coming.
=So in ECom, we have leadership share.
= In modern trade as well, in stores like Reliance and DMart. We are market leaders in E-Commerce channels like
Amazon.
3…ROC@20% -23% target
A…Product mix (margin)
B… scale.
C…optimizing the working capital.
=I think all these three initiative will take us to the ROC of 20%, which we are working towards – 23%.
4…New products
= It is currently 2% of total revenue. And we expect this to go to 10% in the next five yrs.That should drive 1.5% increase in our operating margin
=This is the first year of the big new product initiative going in the market, and the initial sign of consumer acceptance are very positive, and we are continuing our progress to achieving 10% of our revenue over the next five years from these new product lines.
=The new products will be requiring lesser of my working capital, the working capital cycle in the new products is comparatively less. It requires a working capital cycle of 90 to 100 days.
=Once that 10% of my total revenue comes from the new product, | will have a reduced working capital and 1.5% increase in margin in next 5 yrs.Both these things will be contributing to the ROC of more than 22%.
= We have ready to eat; we have ready to cook in our portfolio. And as | said we are getting a very good interest of the consumer. And the categories are large enough to give us a volume of that.
= We define ourselves as a Consumer Food Company, giving specialty food in terms of specialty rice and rice value-ads.So all the adjacencies where there is a consumer need, which we can, with our core competence satisfy, we are into.
Q=So would it be fair to say that you are trying to build on your core competence of rice and look at something adjacent into that rather than just being all over?
Ana=Absolutely. We are building on what Daawat as a brand stands for and where it extends. So certainly, we are not going to be all over, as you’ve rightly said.
5…Advertise
= Ad spend is 2.3% of revenue
=We will be increasing the ad
spend. But we also will have a synergistic impact because all of them are under the Daawat family brand. Overall, the ad spend will go up to close to 3% next year, from the 2.3% this year. But,
ad spending is something that you take a call on quarter-to quarter basis once you see what’s happening in the market and with the business.
6…Risk
=Risk is, as | explained — we have to pass on the price increase to customer. That’s the only risk.
=On the service level, on supply chain, we don’t foresee any short term risk.
7…Competitiors
=In different geography, different competition is there.
= In India, KRBL is our competitor in consumer space. So again, every different market has different competition.
=Kohinoor brand acquired by adani wilmar is in the market for the last 30 years, and the brand has its own strength. As in, last time when they were in the range of 3% to 4% market share.
Q=Wanted your view on the recent Adani Wilmar — Kohinoor acquisition, in terms of whether you think it’s going to put pressure on margins to grow market share in India, or you see something positive to come out from this.
Ans=: Kohinoor was present in the market for a long time. So we don’t see any big impact of that.
8…Acqusitions
=Our growth strategy is to grow organically and inorganically. And on that strategy, we have done that acquisition in USA of a very strong brand of Jasmine rice and we are open and we keep evaluating.
=Jasmine brand
…Jasmine rice is a direct synergy to our distribution in USA. And as far as brand is concerned that has market share around 10% in that market.
=Golden Star acquisition.
…We are in the phase of completion. This is information is confidential, but maybe in the next call we will be able to explain more on it.
9…Capex plan
=It’s a very normal, we will be spending in the range of INR 80 crore to INR 100 crore.
10…Valuation
Q=We from a INR 1,000 crore revenue. to INR 5,000 crore brand, and you’ve grown very consistently with very consistent margins and ROCs, which are very much decent. I’m just trying to get in my head around why we trade at such valuations. Why do we trade it around 7, 8x? Maybe 5x are cash flow from operations
Ans= Actually, wnen we started LT Foods, the revenue was INR 3 crore. And where we are, we are very proud of as an LT Foods. And on the valuation front, | think you are, you people are the better people to guide us or address on that.
= But for sure we understand as per competitive landscape as a Consumer Food Company, we as a Company is undervalued, very undervalued.
Q=. If you buy back the stock, your ROC would be significantly higher than what you’re getting in the business.
Anz=Yes. We are evaluating this option.
11…Payment to farmers
=In Punjab and Haryana ,payment to farmers would be through Mandis and in MP, UP it would be directly through farmers
=So over here, whenever we are making payments to farmer, It’s completely through banking.
12…Why less focus on middle east unlike other companies e.g krbl
=Every Company has its own strategy and play from their own strength. And we’ve chosen to play from
India, Europe and America. Middle East is a little mature market. And as a strategic call, we thought let’s focus on the other market first and this we can take later from.
13…MOATS
=I’d like you say that we have strong distribution channel built over many, many years
= The other big strength that we have in these markets is our brands.
=So these two become very strong leveraging point for us, coupled with our backend strength that we are able to supply from India. We are certainly using this distribution network
and the brand.
A…Brand
=Our brands are recognized in these
markets for premium and consistent quality. They have very good imagery.
B…Distribution channel
=We’ve launched, RTH, Royal RTH in the U.S., which is doing very well. This year we’ve launched Daawat Cuppa Rice in India, in the Middle East, in markets like Australia, we’ve launched Daawat Sauté Sauces and Biryani kits.
= These are all riding on our distribution network, which therefore, do take the Daawat brand across consumption occasions and formats, and further strengthen the brand.
=Kari Kari is a snack that we’ve come in, which is again, doing well, and is again, riding this network.
=And the distribution helps us to get it there, far more quickly than somebody else would be able to. And also provides us the efficiency and skill to our distribution
14…Horeca segment
=HORECA roughly contributes to our portfolio, if you talk about India it is 40% sales, but globally it is in the range of 15% sales from horeca
15…Recently launched New products
A=We just launched a few products, biryani kit and biryani gravies , that we will be scaling up.
B=We also have launched a Cuppa rice, which is doing well, and there is therefore again, we are scaling that up.
= So if we see the next sort of three to six months, we’ve just got two of these big initiatives in the market, which need to be taken across both India
and internationally. And they are doing very well internationally as well.
C=We also have, RTH in the U.S. and
D=Daawat Sehat in India.
=So Royal RTH and Daawat Sehat, which are really big contributors at this point in time to our revenue, but the potential for both of them is much higher.
=We certainly going to be putting brand investment against all these four initiatives. | mean, exact
details of that, we cannot disclose right now, but there would be significantamount of marketing and
promotion spends on all of these.
Disc…invested
My latest portfolio
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