Mukul Agrawal portfolio stock LT Foods is a multibagger. It is a good buy for 31% upside

Mukul Agrawal holds 1.15% of LT Foods (DAAWAT) in his portfolio worth ₹156 Cr. LT Foods is a multibagger with 1433% return in 5 years. It has well known FMCG RTE brands like Daawat etc. M-Cap is ₹13,500 Cr. In the last 18 years, revenue CAGR is 18% & PAT CAGR is 21%. Products are exported to USA (50% market share) etc.

Motilal Oswal initiated coverage on the stock with a target price of Rs 520 and a ‘buy’ rating. The target price implies an upside potential of 31%.

LT Foods has a strong international presence in over 80 countries (69% revenue share in FY24), achieving a 17% CAGR in international revenue during FY19-24, a growth fueled by new geography expansion, innovative product launches, and brand acquisitions.

The company continues to dominate the US market (39% revenue share in FY24), leveraging its flagship Royal brand, which commands over 50% market share in packaged basmati rice.

“With a presence in key consuming regions, LTFOODS aims to enhance its market share through strategic marketing and distribution, particularly in the Middle East. Over the last five years, LTFOODS re-rated from 8x P/E (average of the last five years; one-year forward) to 21x (in FY25), fueled by strong cash flow generation (cumulative FCF of Rs 1,770 crore), consistent performance (36% PAT CAGR) due to product and geographical diversification, and improved RoE/RoCE (of 19%/16% in FY24),” said Motilal Oswal in its report.

The domestic brokerage firm also believes that transitioning from a commodity to an FMCG model, all factors position the company nearer to its FMCG peer valuation, estimating that LT Foods will record a revenue/EBITDA/adj. PAT CAGR of 14%/15%/19% over FY24-27.

Indian rice market has transformed from a loose commodity to a branded and packaged product market, largely due to extensive branding efforts by organized players such as LTFOODS, which have established popular brands (like Daawat, Devaaya, Royal etc).

LT Foods has come a long way from being just a rice company to a FMCG company having built a diverse portfolio to meet needs for all meal occasions and is a pioneer in the organic food sector (over two decades of presence), accounting for 9% of total revenue, with plans to achieve double-digit growth.

Additionally, the company’s improving margins and stable working capital translate into healthy cash flow. The company has generated cumulative FCF of Rs 1,760 crore over the last five years, with an average CFO-to-EBITDA ratio of 81%, which Motilal Oswal estimates that the company will maintain a healthy ratio going forward.

However, climate risk for rice production and volatility in rice prices, competitive business environment and geopolitical and foreign currency risks have been listed as they key downside risks for the company.