Lakshmi Energy & Foods is set to maintain its growth momentum in future.The stock is attractive for long-term investors
THOUGH THE market is in a bear phase, some stocks have outperformed the Sensex. Lakshmi Energy And Foods (LEAF) is one such scrip that has appreciated 34% over the past three months. The company is in a highgrowth phase and is likely to maintain its momentum in future, thanks to ambitious expansion plans. A low beta and stability in growth outlook makes it attractive for long-term investors.
BUSINESS:
LEAF is a leading nonbasmati rice processor. It completed its expansion recently, which involved setting up a 30-mw huskbased power plant and raising rice milling capacity to 1.35 mt from 0.97 mt. It has set up wheat flour capacity of 100 tonnes per day. LEAF derives 85% of its revenue from rice processing and 15% from bran oil, de-oiled cake and branded rice. It sells 75% of its rice output to FCI at a margin of Re 1/kg. The balance is sold at higher margins in the open market. It has ventured into branded foods under the name 'Lakshmi Foods' via its subsidiary, Punjab Greenfield Resources.
BUSINESS:
LEAF is a leading nonbasmati rice processor. It completed its expansion recently, which involved setting up a 30-mw huskbased power plant and raising rice milling capacity to 1.35 mt from 0.97 mt. It has set up wheat flour capacity of 100 tonnes per day. LEAF derives 85% of its revenue from rice processing and 15% from bran oil, de-oiled cake and branded rice. It sells 75% of its rice output to FCI at a margin of Re 1/kg. The balance is sold at higher margins in the open market. It has ventured into branded foods under the name 'Lakshmi Foods' via its subsidiary, Punjab Greenfield Resources.
GROWTH DRIVERS:
The company's power plant, likely to be operational next month, will be eligible for carbon credits. Around 85% of its total power will be sold to the state government. LEAF's diversification into wheat processing is likely to generate annual profit of Rs 15 crore from the current fiscal. Wheat processing capacity will be increased to 300 tonnes per day by end FY09. LEAF has planned investments worth Rs 800 crore over the next four years. Its rice milling capacity will rise by 50%; capacities for downstream products like bran oil extraction and refining will also be expanded. Its power plant capacity will be hiked to 105 mw by '11. The branded foods segment may drive LEAF's future growth. With rising retail sales, it aims to reduce the share of FCI sales to 50% by FY10.
FINANCIALS:
Over the past three years, LEAF's sales have witnessed a 46% CAGR, while net profit has seen 89% CAGR. During the year ended March '08, it posted a 37% increase in sales to Rs 954.5 crore and 67% growth in net profit to Rs 100.9 crore. Thanks to its expansion plans, LEAF's interest cost jumped by 586%, while depreciation cost rose by 59%. Its operating profit margin improved from 13% in FY06 to 20% in FY08.
VALUATIONS:
Considering the benefits of expansion projects, power plant, carbon credits, wheat processing unit and LEAF's rising focus on retail sales, we expect the company to post a net profit of Rs 160 crore in FY09, translating into EPS of Rs 26.7. At CMP of 280, one-year forward P/E works out to 10.4, which is attractive, considering LEAF's high growth prospects.
Beta: 0.36
Institutional Holding: 40.1%
Dividend Yield: 0.3%
P/E: 12.99
M-Cap: Rs 1,681 cr
CMP: Rs 280
The company's power plant, likely to be operational next month, will be eligible for carbon credits. Around 85% of its total power will be sold to the state government. LEAF's diversification into wheat processing is likely to generate annual profit of Rs 15 crore from the current fiscal. Wheat processing capacity will be increased to 300 tonnes per day by end FY09. LEAF has planned investments worth Rs 800 crore over the next four years. Its rice milling capacity will rise by 50%; capacities for downstream products like bran oil extraction and refining will also be expanded. Its power plant capacity will be hiked to 105 mw by '11. The branded foods segment may drive LEAF's future growth. With rising retail sales, it aims to reduce the share of FCI sales to 50% by FY10.
FINANCIALS:
Over the past three years, LEAF's sales have witnessed a 46% CAGR, while net profit has seen 89% CAGR. During the year ended March '08, it posted a 37% increase in sales to Rs 954.5 crore and 67% growth in net profit to Rs 100.9 crore. Thanks to its expansion plans, LEAF's interest cost jumped by 586%, while depreciation cost rose by 59%. Its operating profit margin improved from 13% in FY06 to 20% in FY08.
VALUATIONS:
Considering the benefits of expansion projects, power plant, carbon credits, wheat processing unit and LEAF's rising focus on retail sales, we expect the company to post a net profit of Rs 160 crore in FY09, translating into EPS of Rs 26.7. At CMP of 280, one-year forward P/E works out to 10.4, which is attractive, considering LEAF's high growth prospects.
Beta: 0.36
Institutional Holding: 40.1%
Dividend Yield: 0.3%
P/E: 12.99
M-Cap: Rs 1,681 cr
CMP: Rs 280
SOURCE: ET
