Want over 200% return in 3 years? Add this rice major to your portfolio

• Follow

Brokerage LKP Securities sees over 200% upside in one of the leading speciality rice major LT Foods, citing consistent growth in topline and moving up of the value chain towards a branded foods company. Shares of the company traded 1.66% higher at Rs 61.15 at around 10 am (IST) on Tuesday, while the benchmark BSE Sensex advanced 0.49% to 49,399.

LKP Securities believes that LT Foods could touch Rs 186 in the next 3 years, indicating an upside of 204% from the current market price. The company has a wide range of rice portfolio suitable to every cuisine and ethnicity. LT Foods forayed into the organic food and ingredient business in the year 1999 through its subsidiary Nature Bio-Foods Ltd. Recently, The company also forayed into the value-added business of health and convenience products with the launch of rice-based snack Kari Kari, Quick Brown rice, Cuppa rice and sauté sauces.

The company exports to more than 60 countries with presence in major geographies like North America, Middle East, Europe and Africa among others. It generates around 85% of its revenues from the core rice business followed by 9% from the organic business. The new product business is still at the nascent stage, while the company targets this business to contribute between 12-15% in the next few years.

For the last 10 years, LT Foods has been consistently growing its revenues at a CAGR of around 15%. “The company has streamlined its operations to reduce its exposure to price risk and geographic risk through diversification and better hedging activities. We expect the company to continue the momentum going forward with a key focus on margin expansion and return on capital,” LKP Securities said.

The brokerage further added that the rice major is diversifying away from its traditional rice business to more value-added business of organic food and ingredients, health and convenience products. Both the business command higher margins than the rice business and has a huge market opportunity size.