Buy LT Foods Ltd For Target Rs.514 By Geojit Financial Services Ltd
LT Foods Ltd. (LTF) is a global consumer-focused specialty food company specializing in basmati rice, organic foods and ready to eat/cook (RTE/RTC) products. Its flagship brands include Daawat in India and Royal in North America. The company has a presence in more than 80 countries with significant regional exposure in the US, Europe, etc.
* Revenue grew 28% YoY (19% YoY excluding Golden Star) and 8% QoQ, reflecting broad -based strength across geographies.
* The core Basmati and specialty rice segment (89% of revenue) grew 34% YoY on 11% volume growth, while Organic Foods & Ingredients declined 13% YoY amid business restructuring and RTH/RTC products grew 13% YoY.
* Gross margin declined 210bps YoY to 32.6% due to changes in shipment terms, while EBITDA rose 20% YoY with a modest 60bps margin contraction to 11.5%. PAT grew 9% YoY.
* India business grew 23% in value and 12% in volume, with market share rising to 23.1%, supported by premiumisation and increasing household penetration.
* North America grew 49% YoY (normalised 27%), with Royal holding over a 60% share and Golden Star retaining its No.1 Jasmine rice position; a new 156,000 sq ft Texas warehouse (completion Jan '27) will expand distribution.
* Margin expansion is expected as value-added segments gain scale, with the RTE/RTC business targeted to achieve breakeven (Rs.400cr) by FY27-end and Organic EBITDA projected to recover to Rs.70-80cr.
Outlook & Valuation
The core basmati franchise continues to deliver strong volume-led growth, while market share gains in India reinforce the premiumisation thesis. Near-term margins face two transitory drags: the organic segment’s shift from a wholesale model to a direct CPG (Consumer Packaged Goods) model and changes in related-party shipment terms. Regional expansion in North America, the UK/Europe investment phase and launches in the Middle East support the medium-term volume outlook, while the business has navigated tariff resets and geopolitical volatility without material impact. Branded, premium, and RTE/RTC products are expected to remain key growth drivers, delivering stronger growth than the broader portfolio. We value the stock at 17x on FY28 EPS (3-yr avg. 20x) to arrive at a target price of Rs. 514 and maintain our BUY rating.
Key Highlights
* India's share climbed to 23.1% on the back of premiumisation, wider distribution and rising penetration. In the US, Royal stayed above a 60% share, and Golden Star kept its lead in Jasmine rice.
* Freight rates surged from $200 to $4,000 due to regional shipping challenges in the Middle East, placing significant pressure on margins across Europe, the U.K., and Middle Eastern markets.
* The RTH/RTC segment is positioned for strong growth, with a new U.S. facility expected to support a doubling of the ready-to-eat business within three years, while the broader category targets 15-20% annual growth and breakeven at Rs.400cr revenue.
* Inventory days eased to 187 from 221 YoY, helping cut the overall working-capital cycle to 170 days from 195.
* U.S. tariff fluctuations led to pricing volatility; however, the tariff reduction from 50% to 10% helped improve gross margins.
* Nature Bio Foods is transitioning its organic segment to CPG model and investing in Europe, with EBITDA margins expected to improve from ~4% to 7-8% by FY27 end and reach double digits thereafter.
* Paddy costs remain elevated; however, with most acreage irrigated and a year’s inventory already secured, management sees limited sourcing risk and expects to pass on any crop-driven inflation.
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