Report on ADF Foods

8/6/2019 Report on ADF Foods

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Breath to your Investment

Tarun Aggarwals Sanjivani StockE-Mail [email protected]

June 27, 2011 CMP-Rs.64/-

Target Price Rs.100/-

Research report on ADF Foods Ltd.

(BSE code-519183 & NSE code -ADFFOODS)

An 21 year old entity that will now move to its name and

motto of wealth creation

We all have seen some time back, our Grandmother & even mother also used tomake food at home and feel happier. At that time no one was even think that

we will buy ready to eat foods, vegetables, pickles, papad and juices from

outside. The trend change because of nuclear families where husband and wife

both are working and they dont have time to cook at home. The market for

eatable items and juices in India alone can witness substantial growth for

ADFand can expand significantly in the years ahead. Modern Retail format in

India and Retail Growth in semi urban and rural India are a few factors which

present opportunities for the company.

Background & Business details of the company:

What started as a humble venture back in 1932 of a small retail store selling Dry

Fruits & Nuts, soon diversified into a Major Food Processing Company

manufacturing Ethnic Indian pickles, chutneys, canned foods frozen foods and
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spices under various Brand Names which are today leaders in their segments and

categories.

ADF (American Dry Fruits) was incorporate in 1990 is today Indias leading

integrated ready to eat food and Frozen Food Company. ADF is promoted byHariram Mewawala, Ramesh Thakkar and Kishore Thakkar. The company operates

in manufacturing and processing a wide range of canned, bottled and processed

vegetables fruits and foods for the export and domestic markets. ADF markets its

product under various brand names across the globe. The exports are a major

contributor to its top-line.

Infrastructure The manufacturing plants are located in Nadiad (Gujarat) and

Nashik (Maharashtra). The production capacity at Nadiad plant is 10,450 metricton (MT) and Nashik plant is 11,000 MT. ADF has 3 subsidiaries i.e. ADF Foods UK

Ltd (ADF UK), ADF Foods (Mauritius) Limited (ADF M) and 'Power Brands (Foods)

Pvt. Ltd. (PBFPL) as on FY10. In Nasik factory, total built up area is 10000 Sq Mt

while in Nadiad factory, total built-up area is 15000 Sq Mt & USA factory, total

built-up area is 3000 Sq Mt. Product manufactured in these factories pickles,

chutneys, ready to eat curries, frozen parathas, snacks, vegetables & canned

curries. All technology sourced from Buhler, Germany. Totally automated spice

processing units.

Distribution Network The Company is a significant emerging player in the

processed food industry. It is engaged in the manufacturing and export of various

Indian Processed foods. The range of Companys products includes Pickles, Pastes,

Chutney, Ready-to-eat Vegetables, Canned Vegetable in Brine, Frozen Foods,

Spices in whole and ground form, IQF Indian Vegetables, Frozen Parathas, etc.

The Company is tapping new markets and constantly innovating and renovating

the products in its portfolio to meet the changing tastes and preferences of the

Global Consumer. The Company has established brands and strong distributionnetworks in Europe, US, Middle East Countries, Australia, Canada and Asia,

which would ensure immediate distribution of the new variants.


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Brand Names and brand Building:

Ashoka Brand- Ashoka is the companys oldest and Flagship Brand. Themost famous Indian brand in the world. Its range includes ready-to-eat

curries (Heat & Eat), Frozen Foods (Indian Breads & Snacks), pickles,

condiment pastes, mango pulp/slices, chutneys, IQF (Individually Quick

Frozen) ready-to-cook vegetables, and Microwaveable rice

Camel Brand- In the late sixties, ADF acquired a premium Middle Eastern

Pickle brand called Camel to diversify into the processed foods business.

This acquisition was a launch platform for our company into the Food

Processing Industry and International business.

Aero plane Brand After years of the Camel Brand acquisition companylaunched an economy brand of Indian pickles in the Middle East under the

name, Aeroplane. Aeroplane Pickles has since been a leader in the

economy segment. In the food services category, Aeroplane is the leading

Mango Chutney brand in the UK and the USA.

Truly Indian Brand - This Authentic range of products has been created in

India to suit the taste palate of our Mainstream customers (Non Indian

customers). Delicate, aromatic spices, make Truly Indian a very premium

offering in the Mainstream Stores. Each product offers a true taste of

Indian cuisine at its very best. Khan Saama Brand This Authentic Mughlai Frozen Foods, to cater to

South Asians is brought to you in a range that includes pooris, rumali rotis

and parathas made the traditional way.

ADF Soul Brand - The name, Soul, seems like its made for a food brand.

Add to that the fact that all our food products will have a touch of health.

When our products beautifully marry flavour and goodness, so should the

name. Soul, while subtly cueing soul food, also seems like it would belong

to a brand of substance.

Two another brands are PJs and Nates are also very popular in USA.

Industry Prospects:-

India is one of the worlds major food producers but accounts for less than

1.5 per cent of international food trade. This indicates vast scope for both
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investors and exporters. Food exports in 1998 stood at US $5.8 billion

whereas the world total was US $438 billion. The Indian food industries

sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the

start of year 2000. The industry has the highest number of plants approved

by the US Food and Drug Administration (FDA) outside the USA.

India's food processing sector covers fruit and vegetables; meat and

poultry; milk and milk products, alcoholic beverages, fisheries, plantation,

grain processing and other consumer product groups like confectionery,

chocolates and cocoa products, Soya-based products, mineral water, high

protein foods etc. We cover an exhaustive database of an array of

suppliers, manufacturers, exporters and importers widely dealing in sectors

like the -Food Industry, Dairy processing, Indian beverage industry etc. We

also cover sectors like dairy plants, canning, bottling plants, packagingindustries, process machinery etc.

Key management personnel:

Mr. Ramesh H. Thakkar - Chairman

Mr. Ashok Thakkar - Vice Chairman

Mr. Bimal Thakkar - Managing Director

Mr. Bhavesh R. Thakkar - Executive Director

Financials : As per the financials of ADF Foods at Market cap of120 Cr. With

sales revenue of Rs.111 Cr i.e. we are getting the whole company at 1.08 times of

the sales revenue of the company. EPS of the company comes Rs. 8.90/- The book

value of ADF Foods is Rs. 60.50 i.e. Stock is available price to book value only at

1 times. The company has lot of potential to go up and the investment will just as

risk free investment.

Here below one can see Qtrly trends of the company:-

Quarter On

Quarter(Standalone)

Particulars 201103 201012 201009 201006 201003 200912 200909

Net Sales & Other Operating Income 30.99 28.53 29.30 21.98 28.16 23.32 27.37


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Total Expenditure 25.10 22.88 22.69 18.33 26.04 19.67 20.75

PBIDT (Excl OI) 5.89 5.65 6.61 3.65 2.12 3.66 6.63

Other Income 1.23 0.67 1.22 2.18 2.75 0.64 0.49

Operating Profit 7.12 6.32 7.83 5.83 4.87 4.29 7.12

INTEREST 0.47 0.45 0.33 0.38 0.47 0.45 0.47

Exceptional Items 0.22 0.03 0.00 -1.21 0.00 0.79 0.38

PBDT 6.87 5.90 7.50 4.24 4.40 4.63 7.03

DEPRECIATION 1.15 1.14 1.12 1.10 1.20 1.00 1.00

PBT 5.73 4.76 6.38 3.14 3.20 3.62 6.03

TAX 0.29 0.47 0.86 0.58 0.51 0.41 1.46

Profit After Tax 5.44 4.28 5.52 2.56 2.69 3.22 4.57

Net Profit (After Extrodinary items) 5.46 4.25 5.52 2.56 2.68 3.07 4.56

Closing Price 58.50 68.10 87.20 81.30 93.35 68.65 73.65

Calculated EPS Unit Curr 2.67 2.10 2.71 1.26 1.32 1.58 2.42

Calculated EPS Annualised Unit Curr 10.68 8.41 10.84 5.03 5.29 6.32 9.69

PE 5.48 8.10 8.05 16.15 17.65 10.86 7.60

PBIDTM% (Excl OI) 19.02 19.81 22.56 16.61 7.52 15.67 24.21

PBIDTM% 22.97 22.15 26.74 21.01 17.28 18.41 26.00

PBDTM% 22.17 20.67 25.60 19.29 15.63 19.83 25.67

PBTM% 18.47 16.67 21.79 14.30 11.37 15.53 22.04

PATM% 17.55 15.02 18.84 11.66 9.57 13.80 16.71

Peer Group

Comparison

Company Name YearEnd NetSales PBIDT PAT EPS PE Mkt Cap PBIDTM% PATM% ROCE% RO

ADF Foods 201103 112 26.14 17.81 8.90 6.57 117.00 23.38 15.93 18.29 1

Nestle 201012 6255 1273.94 818.66 84.91 44.70 36591.69 19.98 12.84 159.56 11

Glaxo.Cons. Health 201012 2306 494.12 299.85 71.30 32.44 9725.75 20.33 12.34 48.73 3

Britannia Inds 201003 3401 219.40 116.51 9.75 32.80 3821.24 6.41 3.40 15.64 1

Jubilant FoodWorks 201003 476 66.54 32.97 5.18 60.53 1995.49 13.99 6.93 36.31 4

Ruchi Soya Inds. 201003 13514 550.06 172.47 6.54 14.88 2560.54 4.07 1.27 12.64 1

Kwality Dairy 201003 1054 52.25 17.95 0.58 139.80 2508.87 4.96 1.70 25.91 4

Rei Agro 201003 3693 612.60 157.17 3.22 9.99 1569.50 16.59 4.26 13.20 2

Zydus Wellness Ltd 201103 336 91.61 59.48

Comparision Company Vs Industry:

ADF Foods Ltd. Company V/s Industry- [INR-Crore]

Description

Mar-

11

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11

% to Ind

Agg

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% to Ind

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09 Mar-09 % to


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No of Companies 3.00 204.00 309.00

Financials

Net Sales 111.77 901.82 12.39 102.89 90536.78 0.11 95.75 110819.68

Total Income 116.09 914.03 12.70 109.44 91623.23 0.12 99.57 112346.93

Total Expenditure 89.95 781.81 11.51 83.82 84595.88 0.10 80.22 104329.88

PBIDT 26.14 132.22 19.77 25.62 7027.35 0.36 19.35 8017.06

PBIT 21.64 121.67 17.78 21.43 5637.35 0.38 15.42 6228.94

PBT 20.01 116.64 17.15 19.62 4086.72 0.48 13.22 3915.83

PAT 17.81 81.79 21.77 15.65 2904.41 0.54 10.20 2606.98

Cash Profit 22.31 92.34 24.16 19.84 4157.34 0.48 14.13 4290.74

Total Debt 7.07 32.32 21.87 1.15 22008.01 0.01 1.58 24278.12

Gross Block 75.67 207.79 36.42 68.79 23233.22 0.30 61.77 27489.02

Net Current Assets 49.83 122.10 40.81 49.00 21439.97 0.23 30.54 21567.06

Total Assets 128.43 328.92 39.04 108.21 41365.27 0.26 89.08 44044.72

Margin Ratios

Core EBITDA Margin(%) 19.52 13.30 2.90 18.53 6.52 0.03 16.20 5.81

EBIT Margin(%) 19.36 13.49 2.40 20.83 6.15 0.02 16.08 5.58

Pre Tax Margin(%) 17.90 12.93 2.22 19.07 4.46 0.02 13.79 3.51

PAT Margin (%) 15.93 9.07 1.97 15.21 3.15 0.02 10.64 2.34

Total Debt/Equity(%) 0.06 0.12 0.01 0.41 0.02 1.32

Current Ratio(x) 9.50 5.54 7.61 2.74 4.43 2.57

Quick Ratio(x) 7.56 4.54 6.56 1.59 3.16 1.37

Interest Cover(x) 13.27 24.20 11.84 3.64 7.01 2.69

Latest Developments & Conclusion:

Acquisition of Elenas Foods-a US based manufacturer and marketer of

organic and natural Mexican food product.

Additional of Elenas popular brands like PJs Organic and Nate are to our

existing portfolio.

Our range of ready-to-eat curries under the Ashoka brand is now launchedwith new recipes in new packs.

Expansion in new marketsFrance-Sweden.


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Addition of new client for contract manufacturing in the US and Sweden.

Increasing the distribution network for ADF SOUL in select retail outlets in

Mumbai and Pune.

Introduction Of inhouse cold storage unit (750 MT approx), leading to an

expansion of the frozen unit capacity at our Nadiad facility. This would

result in efficient management of cold chain.

We believe that there could be interest of ready to eat food items of the world

to take strategic stakes in the likes of ADF Foods Ltd. primarily because of the

fact that this provides them an immediate large footprint in one of the largest

and fastest growing markets in the world. In the event of the company being

able to improve its Operating Margins or in the event of the promoters decidingto sell stake, the upside from the current levels could be substantial. The

downside looks restricted from the current levels.

Long Term investors can accumulate the stock.

The author invites readers to send him feedback, Queries and welcome

comments @[email protected] Mr.Tarun Aggarwal

Disclaimer: This document is for private circulation only neither the information

nor any opinion expressed constitutes an offer, or any invitation to make an

offer, to buy or sell any securities. We does not accept any liability what so ever

direct or indirect, that may arise from the use of information herein.
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