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28.07.2019

AAKASHAYA PATRA EXCLUSIVE STOCK FOR INVESTMENT:

DFM FOODS LTD (CMP 260)

ENTRY LEVEL: 240-250 STOP LOSS: 200 TARGET :350 TIME FRAME: 18-24 MONTHS

DFM Foods Limited, the initiator of packaged snack foods in the Indian market, is engaged in the business of manufacturing, selling, and marketing of packaged foods and has been a leader in the space for over 30 years. The company markets its products under the brand names of "CRAX","CURLS", "NATKHAT" and "FRITTS". The product portfolio comprises of Corn Rings,Corn Puffs, Wheat Puffs, Cheese Balls, Corn and Potato Sticks and traditional Namkeens in 13 distinct product variants sold through an extensive distribution network. The company has two state of the art processing units located at Ghaziabad and Greater Noida.It has an equity base of just Rs.10.02crore that is supported by reserves of around Rs.119.23crore.The Promoters hold 38.27%, FIIs hold 10.99%, Mutual Funds hold 3.02%, Westbridge Crossover Fund LLC hold 14.92%, Ashish Kacholia hold 2.23% while the investing public holds 30.57% stake in the company.

Company has reported strong numbers for Q1FY20. During Q1FY20, DFM posted 52.29% higher PAT of Rs.7.63crore on 29.42% higher sales of Rs.127.72crore fetching an EPS of Rs.1.52. During FY19, it reported PAT of Rs.32.76crore on sales of Rs.483.62crore fetching an EPS of Rs.6.54.At CMP stock is trading at PE ratio of 37x. It has paid 62.5% dividend for FY19.Commenting on the results, Mr. Mohit Jain, Managing Director, DFM Foods Ltd. said "We have started the year on a very positive note with the company having recorded a strong growth of nearly 30% in the first quarter. Like in the previous quarter, the growth was attributable to both an increase in the sales of Rings as well as the success of our new product strategy. Sales of Rings which have shown a great deal of consistency in recent quarters remained strong in Q1 as well. It seems that the continued management focus on the brand and various changes brought about in our marketing and consumer promotion strategy for Rings are now paying off.On the new product front, Curls continued to grow in Q1 while Fritts which was launched in Q3 of last year, also contributed to the increased revenue. Fritts has seen good traction in the marketplace in particular the Cream and Onion Flavour and we hope to grow sales in coming quarters with continued advertising support and increased penetration in both retail and wholesale. As for Pasta crunch which was only recently launched in Mar 19, the general market feedback is positive.

Given the lean season in Q1, the product has so far only been launched in retail stores in major markets of the North Zone. During Q2, we intend to activate the wholesale channel as well as extend distribution to smaller cities. On the capacity expansion front, work continued during the quarter and we are on track to commission our new extrusion line of 5000 MTPA by the end of Q2 FY 20. The expansion which is being done at our Gr. Noida facility shall require a capital expenditure of approx. Rs.20 crores and result in an incremental revenue potential of approximately Rs.100 crores per annum. Furthermore, the company has taken an industrial premises on a long term lease also in Gr. Noida, for future expansion. Going forward, as we move out of the lean season,we are confident of increasing sales further on the back of the momentum seen in Rings, recent new product launches and continued distribution expansion." 

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