Unresearched Stock with potential to become FMCG Co

 SITA SHREE FOOD PRODUCTS LTD 

Recommended previous week as Curtain-raiser, SITA SHREE FOOD PRODUCTS LTD has been Upper Circuit for entire week. Here under, we are unfolding our full research report.

Indore based co has 3 plants. Its product range includes:

Atta,Maida,Besan,Suzi,Lentils,Soya Oil,Soya DOC,Soya Chunks,Soya Lecithin,Chick Peas

Major Clients:

ITC,Future Group,MORE,RIL,Parle,BEST PRICE,Suguna,Godrej Agrovet,Unibic,MRT,Spencer,Auchan,Duke
Heritage,CARGILL

FINANCIALS:

                                  Y E A R      E  N   D   E    D
                         31.3.2012    31.3.2013     31.3.2014     31.3.2015
                             Rs/Cr         Rs/Cr             Rs/Cr
     Rs/Cr

Sales                    144            213              493            581

Depreciation          0.49            0.89            3.05            5.94

Deferred Tax                                               1.45          3.08

PAT                     0.99          -0.86               1.00         2.46

CASH PROFIT                                            5.50         11.48

Equity
      27.83

SFPL can be fastest growing FMCG co as it has increased its topline to 581 crores in 2015 as compared to topline of 144 crores in 2012 i.e. 300% growth in topline in 3 years.SFPL incurred higher capex for expansion as compared to envisaged in Prospectus as SFPL has put up much higher manufacturing capacities. As a result, its Depreciation has ballooned to 5.94 crores from 49 lacs in 2012.  Despite substantially higher outgo for Interest and

Depreciation, SFPL has increased its PAT for 2015. It is notable that SFPL CASH PROFIT for FY15 is 11.48 crores compared to 5.50 crores in FY14 

SitaShree Food is supplying major part of production to aforesaid MAJOR INDIAN BRANDS under their labels. SitaShree has its own brands named SITA SHREE GOLD AND NATURE HARVEST.  SitaShree is selling under

its own brand in MP. Although real profit margins are under own brand but it requires to give long term credit to wholesalers/retailers and moreover, company needs big warchest to spend on ad/publicity (which it do not have at present).

As per our interaction with mgtmnt, Co is targetting to achieve Sales of 850 Crores for FY16  and Rs 1000 Crores for FY17. Looking at co's growth in last 3 years, SFPL should be able to achieve target topline

                            2015-16E     2016-17E
                            Rs/Cr            Rs/Cr

Sales                      850              1000

Net Profit                 11                 18

Equity                 27.83                27.83

EPS Rs                3.95                 6.45

Consider company with such huge turnover available at market cap of mere 50 crores. It is peanuts. SitaShree is not making losses (despite having taken debt to set up new plant in 2014 at substantial capex).

Even if co is not able to escalate sales under its brand, we feel that Sitashree can report PAT of 11 crores for FY16 and PAT of 18 crores for FY17.

As co starts earning higher profits, banks may sanction higher working capital limits which will enable Sitashree to escalate sales under its own brand. As and when its happens, its PAT can increase further more.

Co has built big manufacturing base which will bear rich fruits in coming years as with existing capacities in place, SFPL can achieve topline of 1200-1300 crores at optimum utilization

SITA SHREE FOOD PRODUCTS is amongst the most undervalued stock for genuine investors who buy a stock with horizon of 12 months to 36 months for OUTPERFORMER appreciation.

At cmp, scrip is almost riskfree. Actually scrip is DIRT CHEAP when sensex is trading @ 27k.  Buying this scrip is not even ' catch them young' . It is like 'catch them in the womb'.

Large sized global FMCG companies in India are trading at outrageous valuations. Looking at continued clamour for these scrips at EXHORBITANT valuations, SITASHREE FOODS is a GREAT PICK. Scrip can be Rs 50 in next year in 2016 and even Rs 90 in 2017 (if broader markets remain stable and do not crash)