CMP 556.00

Target Price 620.00

ISIN: INE456C01012

NOVEMBER 7th, 2015

12th h, 2013

DFM FOODS LTD Result Update (PARENT BASIS): Q2 FY16

BUY

Index Details

Stock Data

Sector Packaged Foods

BSE Code 519588

Face Value 10.00

52wk. High / Low (Rs.) 746.50/270.00

Volume (2wk. Avg.) 5840

Market Cap (Rs. in mn.) 5560.00

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY15A FY16E FY17E

Net Sales 2892.50 3453.65 3961.33

EBITDA 331.20 353.25 397.33

Net Profit 110.10 148.52 170.83

EPS 11.01 14.85 17.08

P/E 50.50 37.44 32.55 Shareholding Pattern (%)

As on Sep - 2015 As on Jun - 2015

PROMOTER 44.18 44.18

FIIs 9.95 9.95

DIIs 0.01 0.01

OTHERS 45.86 45.86

1 Year Comparative Graph

DFM FOODS LTD BSE SENSEX

SYNOPSIS

DFM Foods introduced CRAX Corn Rings in 1984. Its

products are sold through distribution network

including states of Delhi, UP, Punjab, Haryana and

Gujarat etc.

Net Sales for the quarter rose by 33.35% to Rs.

971.70 million from Rs. 728.70 million, when

compared with the prior year period.

During the quarter, PAT rises by 98.33% to Rs.

47.40 million from Rs. 23.90 million over the

corresponding quarter last year.

For Q2 FY16, Operating profit registered a growth

of 57.25% y-o-y of Rs. 103.00 million as against Rs.

65.50 million for the Q2 FY15.

Profit before Tax stood at Rs. 72.60 million in Q2

FY16 compared to Rs. 36.30 million in Q2 FY15,

registered a growth of 5.83% y-o-y.

In Q2 FY16, Other income is Rs. 5.10 million as

against Rs. 1.00 million in the corresponding period

of the previous year.

For the end of H1 FY16, Net sales grew by 22.29%

at Rs. 1652.20 million compared to Rs. 1351.10

million for the end of H1 FY15.

Net profit for the half year ended Sep 30, 2015 was

Rs. 68.30 million, increased by 33.92% as compared

to Rs. 51.00 million for the half year ended Sep 30,

2014.

Net Sales and PAT of the company are expected to

grow at a CAGR of 15% and 28% over 2014 to

2017E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

DFM Foods Ltd. 556.00 5560.00 11.01 50.50 12.16 25.00

Vadilal Industries Ltd. 613.50 4409.70 13.68 44.85 8.15 10.00

Hatsun Agro Products Ltd. 421.45 45808.10 7.48 56.34 20.69 180.00

Heritage Foods Ltd. 479.20 1117.00 19.00 25.22 5.76 30.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q2 FY16,

DFM Foods Limited is a pioneer in the Indian

packaged snack foods business. Established in 1983,

its flagship brand CRAX was the first successful

packaged snack food in India. The Company has

reported its financial results for the quarter ended

30th Sep, 2015.

Months Sep-15 Sep-14 % Change

Net Sales 971.70 728.70 33.35

PAT 47.40 23.90 98.33

EPS 4.74 2.39 98.33

EBITDA 103.00 65.50 57.25

the company’s Net sales for the quarter rose by 33.35% to Rs. 971.70 million from Rs. 728.70 million, when

compared with the prior year period. The company’s net profit at Rs. 47.40 million against Rs. 23.90 million in

the corresponding quarter ending of previous year. Profit before interest, depreciation and tax is Rs. 103.00

millions as against Rs. 65.50 million in the corresponding period of the previous year. The company has reported

an EPS of Rs. 4.74 for the 2nd quarter as against an EPS of Rs. 2.39 in the corresponding quarter of the previous

year.

Break up of Expenditure

Particulars

(Rs. Million)

Q2 FY16 Q2 FY15 CHG%

Cost of Materials consumed

613.40 432.40 42%

Employees Cost 84.40 60.90 39%

Depreciation 16.50 14.60 13%

Other Expenses 168.80 165.30 2%

COMPANY PROFILE

DFM Foods Limited is a pioneer in the Indian packaged snack foods business. Established in 1983, its flagship

brand CRAX was the first successful packaged snack food in India. The company introduced CRAX Corn Rings in

1984. DFM Foods has invested continuously in brand building and marketing activities. The core business of the

Company is the manufacture and marketing of snack foods. Company products are sold through an extensive

distribution network including the states of Delhi, Uttar Pradesh, Punjab, Haryana, Uttarakhand, Himachal, J&K,

Rajasthan, Madhya Pradesh, Maharashtra and Gujarat. Serviced by distributors, and overseen by company own

Sales Team, retailers receive regular and ready delivery of fresh stocks, ensuring customer satisfaction at every

outlet.

Manufactures

DFM Foods has two processing facilities, one in Ghaziabad, and the other in the Greater NOIDA region, both in

close proximity to the Company's corporate office in Delhi. The company’s facilities make use of state-of-the-art

manufacturing equipment from across the globe, to ensure consistency and quality of all its products.

Products

Corn Rings and Wheat Puffs are marketed under the CRAX and NATKHAT brand names respectively. Both these

have become extremely popular snacks, especially among children.

In the namkeens segment offering a complete range of 13 distinct product variants that include Bhujiyas, Daals,

Mixtures and Nut-Mixes. These are sold in several pack sizes to cater both casual/impulse consumption as well

as consumption at home.

FINANCIAL HIGHLIGHTS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at 31st March, 2014A - 2017E FY-14A FY-15A FY-16E FY-17E

I. EQUITY AND LIABILITES

Shareholder's Funds

a) Share Capital 100.00 100.00 100.00 100.00

b) Reserves and Surplus 277.30 357.30 476.64 607.71

A Sub- Total Net worth 377.30 457.30 576.64 707.71

Non Current Liabilities

a) long term borrowing 324.50 280.30 308.33 326.83

b) Deferred Tax Liability (net) 64.80 74.90 83.14 89.46

c) Long term Provisions 70.20 76.60 81.96 86.06

d) Other Long term liabilities 4.10 8.70 17.23 21.70

B Sub- Total Non Current liabilities 463.60 440.50 473.43 502.35

Current Liabilities

a) Short term borrowings 49.10 111.40 75.75 59.09

b) Trade payables 131.50 143.40 284.79 358.84

c) Other Current liabilities 203.40 214.60 227.48 237.94

d) Short term Provisions 41.00 50.70 24.34 27.50

C Sub- Total Current Liabilities 425.00 520.10 612.36 683.36

TOTAL EQUITY AND LIABILITES (A + B + C) 1265.90 1417.90 1662.43 1893.43

Non-Current Assets

Fixed Assets

i. Tangible assets 908.20 881.80 917.07 948.25

ii. Intangible assets 0.40 0.40 0.44 0.48

iii. Capital Work in Progress 2.60 0.20 0.21 0.23

a) Sub-Total Fixed Assets 911.20 882.40 917.72 948.96

b) Non Current Investments 0.20 0.20 0.20 0.20

c) Long Term loans and advances 13.90 25.40 48.51 62.10

d) Other Non- Current Assets 9.10 1.60 26.69 38.70

D Sub- Total Non-Current Assets 934.40 909.60 993.12 1049.95

Current Assets

a) Current Investment 140.00 307.90 295.58 393.13

b) Inventories 149.10 182.50 211.70 241.34

c) Trade receivables 0.10 0.30 0.35 0.40

d) Cash and Bank Balances 22.60 8.60 150.56 195.31

e) Short-terms loans & advances 17.40 8.20 10.00 11.80

f) Other current assets 2.30 0.80 1.10 1.49

E Sub- Total Current Assets 331.50 508.30 669.31 843.47

Total Assets (D+E) 1265.90 1417.90 1662.43 1893.42

Annual Profit & Loss Statement for the period of 2014 to 2017E

Value(Rs.in.mn) FY14A FY15A FY16E FY17E

Description 12m 12m 12m 12m

Net Sales 2632.50 2892.50 3453.65 3961.33

Other Income 38.80 21.50 25.16 28.93

Total Income 2671.30 2914.00 3478.80 3990.26

Expenditure -2406.10 -2582.80 -3125.55 -3592.93

Operating Profit 265.20 331.20 353.25 397.33

Interest -84.90 -57.10 -55.62 -60.40

Gross profit 180.30 274.10 297.64 336.93

Depreciation -57.90 -59.10 -67.37 -74.11

Exceptional Items -24.30 -43.10 0.00 0.00

Profit Before Tax 98.10 171.90 230.26 262.82

Tax -27.10 -61.80 -81.74 -91.99

Net Profit 71.00 110.10 148.52 170.83

Equity capital 100.00 100.00 100.00 100.00

Reserves 277.30 357.30 476.64 607.71

Face value 10.00 10.00 10.00 10.00

EPS 7.10 11.01 14.85 17.08

Quarterly Profit & Loss Statement for the period of 31st Mar, 2015 to 31st Dec, 2015E

Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E

Description 3m 3m 3m 3m

Net sales 851.50 680.50 971.70 855.10

Other income 10.50 1.20 5.10 7.55

Total Income 862.00 681.70 976.80 862.64

Expenditure -744.20 -620.30 -873.80 -773.01

Operating profit 117.80 61.40 103.00 89.64

Interest -11.90 -14.20 -13.90 -13.48

Gross profit 105.90 47.20 89.10 76.15

Depreciation -15.00 -15.30 -16.50 -17.00

Exceptional Items -43.10 0.00 0.00 0.00

Profit Before Tax 47.80 31.90 72.60 59.16

Tax -19.90 -11.00 -25.20 -21.00

Net Profit 27.90 20.90 47.40 38.16

Equity capital 100.00 100.00 100.00 100.00

Face value 10.00 10.00 10.00 10.00

EPS 2.79 2.09 4.74 3.82

Ratio Analysis

Particulars FY14A FY15A FY16E FY17E

EPS (Rs.) 7.10 11.01 14.85 17.08

EBITDA Margin (%) 10.07 11.45 10.23 10.03

PBT Margin (%) 3.73 5.94 6.67 6.63

PAT Margin (%) 2.70 3.81 4.30 4.31

P/E Ratio (x) 78.31 50.50 37.44 32.55

ROE (%) 18.82 24.08 25.76 24.14

ROCE (%) 43.03 45.97 43.78 43.11

Debt Equity Ratio 0.99 0.86 0.67 0.55

EV/EBITDA (x) 21.76 17.01 15.56 13.48

Book Value (Rs.) 37.73 45.73 57.66 70.77

P/BV 14.74 12.16 9.64 7.86

Charts

OUTLOOK AND CONCLUSION

At the current market price of Rs. 556.00, the stock P/E ratio is at 37.44 x FY16E and 32.55 x FY17E

respectively.

Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 14.85 and Rs.

17.08 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 28% over 2014 to 2017E

respectively.

On the basis of EV/EBITDA, the stock trades at 15.56 x for FY16E and 13.48 x for FY17E.

Price to Book Value of the stock is expected to be at 9.64 x and 7.86 x respectively for FY16E and FY17E.

We recommend ‘BUY’ in this particular scrip with a target price of Rs. 620.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The snack food industry consists of two principal segments – the traditional ethnic snacks which have been

around for generations and the “modern” snacks which have emerged over the last couple of decades. The

traditional ethnic snacks segment consists largely of the unorganised sector alongwith few organised players. Of

late there has been a shift in this market from the unorganised to the organised sector.

The modern snacks segment consists largely of organized players who employ automated production systems,

mass marketing and organised sales and distribution systems across various geographical markets. The products

manufactured by this segment have been well accepted by the market resulting in its rapid growth. Barring a

few, most players in this segment have only a regional presence and the more successful are continuously

attempting to expand their national footprint.

The DFM Foods Ltd operates in both the market segments. However the modern segment constitutes the bulk of

the business. The continued growth of the economy, increasing disposable income, rapid urbanisation and rising

aspiration offers immense potential for the healthy growth and development of the snack food industry.

Outlook

The continued efforts to develop the business should stand it in good stead. However the economic conditions

prevailing within the country have a significant role to play in the actual performance.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstobjectindia.com

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