ADF Foods Ltd - 78.00 Rs
Established in 1932 as a small retail store selling dry fruits, ADF Foods Ltd (erstwhile known as American Dry Fruits Ltd) has gradually emerged as one of the leading Indian exporter in the processed food industry. It is engaged in manufacturing, processing and marketing a wide range of canned, bottled and processed spices, vegetables and ready-to-eat foods for exports. Today, it boasts of having more than 300 varieties of traditional and ethnic Indian food products including pickles, cooking pastes, chutney, spices in whole and ground form, IQF Indian vegetables, instant mixes, canned ready to eat vegetables, canned vegetable in Brine, frozen foods, various Indian curries and snacks. It constantly innovates and renovates products in its portfolio to meet the changing habits of the consumer. ADF markets its product under five brands, out of which “Truly Indian” and “DES” have been launched last year only. “Ashoka” is their flagship & premium brand whereas “Aeroplane” and “Camel” brands are market leaders in chutney and pickle segment. ADF’s products are quite popular in USA, UK, Canada, Australia & Middle East apart from being sold in leading supermarkets and retail chains across other countries like New Zealand, Japan, Hong Kong, Singapore, Germany, France, Spain and Denmark.
ADF has two EOU manufacturing facilities located at Nasik, Maharashtra & Nadiad, Gujarat and both have obtained various quality certifications such as the internationally recognized BFIC (British Retail Consortium) Global Standard - Foods, ISO 22000/HACCP & ISO 9001:2000. Last fiscal, company increased its capacity by 1000 MT for production of frozen food products at its Nadiad unit. This year it expanded its activity in Nasik EOU division for production of chutneys, retort and ready-to-eat products. Moreover, it is in the process of setting up a third unit in Surat Special Economic Zone with an investment of 20 cr for manufacturing pickles and frozen food products. Importantly, only couple of years back ADF ventured into fast growing & lucrative frozen food / ready-to-eat segment and today this segment is already contributing nearly 25% of total revenue. In its efforts to further diversify its product line, ADF recently launched a range of ready-to eat frozen wraps with a choice of irresistible fillings like aloo tikki, achari aloo, pindi chole, paneer burji, paneer schezwan etc. With the advanced food preservation technology, the shelf life for these products is increasing day by day. Moreover, it has also expanded its menu by introducing / developing non-Indian dishes viz. Asian dishes and Mediterranean dishes. In short, ADF aims to be among the top 3 companies in the world in the ethnic Indian foods segment and promote spice-rich Indian cuisine across the globe, especially to the Non Resident Indian population.
Earlier, there was a dispute between the promoter family members, which have been settled in an out-of-court settlement and accordingly ADF has bought 'Ashoka' & 'Classic Ashoka' trade names which were originally owned by other family members thru Power Brands Food Ltd. The deal has been finalized at 20 cr against which ADF will issue 50 lakh equity shares and will merge Lustre investments (holding company for Power Brands) with itself. World over, the ethnic foods market, especially the Indian ethnic foods market is growing leaps and bounds and ADF with its strong and well differentiated brands, well diversified product portfolio and efficient distribution network is all set to cash on this opportunity. Besides, ADF is also looking to enter domestic market as the demand for ready-to-eat foods is on rise in metro/urban cities due to newly developing social structure of nuclear families and lack of time. This demand is further fuelled by ongoing retail revolution with development of organized large format supermarkets and departmental stores. This will not only derisk its revenue model but also offers a huge potential market which is expected to grow exponentially in future. To fund its growth plan, ADF is planning to raise 30 cr thru private placement of 41.50 lakh equity shares and warrants @ 70 Rs per share and may further raise 50 cr thru FCCB route. For FY08 it is estimated to clock a turnover of 100 cr and net profit of 10 cr which translates into EPS of 6 Rs on enhanced equity of 15 cr. Considering company’s brand value and growth potential it is trading reasonably cheap at an enterprise value of 130 cr. However the appreciating rupee and substantial equity dilution in future is a cause of concern. Hence long term investors are advised to accumulate at sharp declines only with a price target of 120 Rs in 15~18 months.
ADF has two EOU manufacturing facilities located at Nasik, Maharashtra & Nadiad, Gujarat and both have obtained various quality certifications such as the internationally recognized BFIC (British Retail Consortium) Global Standard - Foods, ISO 22000/HACCP & ISO 9001:2000. Last fiscal, company increased its capacity by 1000 MT for production of frozen food products at its Nadiad unit. This year it expanded its activity in Nasik EOU division for production of chutneys, retort and ready-to-eat products. Moreover, it is in the process of setting up a third unit in Surat Special Economic Zone with an investment of 20 cr for manufacturing pickles and frozen food products. Importantly, only couple of years back ADF ventured into fast growing & lucrative frozen food / ready-to-eat segment and today this segment is already contributing nearly 25% of total revenue. In its efforts to further diversify its product line, ADF recently launched a range of ready-to eat frozen wraps with a choice of irresistible fillings like aloo tikki, achari aloo, pindi chole, paneer burji, paneer schezwan etc. With the advanced food preservation technology, the shelf life for these products is increasing day by day. Moreover, it has also expanded its menu by introducing / developing non-Indian dishes viz. Asian dishes and Mediterranean dishes. In short, ADF aims to be among the top 3 companies in the world in the ethnic Indian foods segment and promote spice-rich Indian cuisine across the globe, especially to the Non Resident Indian population.
Earlier, there was a dispute between the promoter family members, which have been settled in an out-of-court settlement and accordingly ADF has bought 'Ashoka' & 'Classic Ashoka' trade names which were originally owned by other family members thru Power Brands Food Ltd. The deal has been finalized at 20 cr against which ADF will issue 50 lakh equity shares and will merge Lustre investments (holding company for Power Brands) with itself. World over, the ethnic foods market, especially the Indian ethnic foods market is growing leaps and bounds and ADF with its strong and well differentiated brands, well diversified product portfolio and efficient distribution network is all set to cash on this opportunity. Besides, ADF is also looking to enter domestic market as the demand for ready-to-eat foods is on rise in metro/urban cities due to newly developing social structure of nuclear families and lack of time. This demand is further fuelled by ongoing retail revolution with development of organized large format supermarkets and departmental stores. This will not only derisk its revenue model but also offers a huge potential market which is expected to grow exponentially in future. To fund its growth plan, ADF is planning to raise 30 cr thru private placement of 41.50 lakh equity shares and warrants @ 70 Rs per share and may further raise 50 cr thru FCCB route. For FY08 it is estimated to clock a turnover of 100 cr and net profit of 10 cr which translates into EPS of 6 Rs on enhanced equity of 15 cr. Considering company’s brand value and growth potential it is trading reasonably cheap at an enterprise value of 130 cr. However the appreciating rupee and substantial equity dilution in future is a cause of concern. Hence long term investors are advised to accumulate at sharp declines only with a price target of 120 Rs in 15~18 months.
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