LT FOODS reported an operating profit of Rs.166 cr.

LT Foods (LTF’s) declared its Q1 FY22-23 results with revenue rising 32.8% YOY to Rs 1,611 crore. The operating profit was up by 27.7% to Rs 166 crore and net profit went up by 23.28% YOY. Its profit margins recovered sequentially but contracted YOY. The net profit stood at Rs. 95 Cr, compared to Rs. 76 Cr. in June 2021. The revenue growth was on account of accelerated brand investments across various segments.

Margins under pressure:

The gross margin improved by 110bps YoY, aided by an improvement in product mix and higher realisation. However, EBITDA margin fell by 40 basis points year on year to 10.0% due to higher freight costs and additional brand investments.LTF has a strong focus on a value-added portfolio, which will support margin improvement in the long-term. The Health & Convenience product segments, which include ready-to-eat products, contributed 2% in FY22, an improvement from 1.5% in FY21. The company targets a 150 bps expansion in EBITDA margin through product mix, operational efficiency, and scale.
The green energy initiatives by the company will provide production efficiency. We anticipate that EBITDA margins will moderate in the near future due to higher costs, but will gradually improve thereafter. LTF’s consistent efforts on brand strengthening and distribution network expansion, as well as region and product diversification via organic and inorganic routes, have been the growth strategy.The recent acquisition in the Jasmine rice segment will strengthen market share. The re-opening of HoReCa channels is also aiding growth, while LTF’s strong focus on value-added products will improve margins.

Valuations:

LT Foods’ EPS was at Rs. 2.80 in June 2022, up from Rs. 2.27 in June 2021. The ROCE and ROE were at 14.8% and 15.6%, respectively. The stock was trading at a P/E ratio of 9.47x. The debt to equity ratio was 0.66x, whereas the asset turnover ratio was at 1.28x. The interest coverage ratio stood at 7.55x. The scrip is trading at Rs. 91.6, up by 2.92% on Monday.