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In the vibrant landscape of Indian cuisine, basmati rice is celebrated for its aroma and cultural significance. With India leading global basmati exports, demand is surging due to changing consumer preferences and the festive season, which drives rice consumption for traditional dishes. Mirae Asset Capital Markets (India) Pvt. Ltd. has launched its thematic report- FMCG, “Basmati Bliss,” highlighting key player’s LT Foods and KRBL, as families prepare to celebrate festivals with grand feasts featuring this cherished grain.

LT Foods

Mirae Asset's Capital Markets has recommended buying LT Foods. The current market price is Rs.415 with a target price of Rs.501, offering a 27% upside potential. LT Foods is strategically diversifying its portfolio and enhancing its digital capabilities to capture evolving industry dynamics. The company is expected to achieve a compound annual growth rate (CAGR) of 12% in revenue from FY24 to FY27E, with a projected 200 basis points (bps) increase in EBIDTA margin, reaching a robust 13%. Compared to KRBL, LT Foods demonstrates a superior growth profile and better return ratios. The stock has recently experienced a favorable re-rating due to its business diversification, improved margins, and reduced debt.

KRBL

KRBL is currently priced at Rs.285 and is considered a favorite stock to buy. Its target price is Rs.332, indicating a potential upside of 17%. The company is expected to benefit from the long-term trend towards branded basmati rice among Indian consumers. Despite a 25% decrease in stock price over the past year due to export concerns, Mirae Asset is optimistic and forecasts a 4.8% earnings compound annual growth rate (CAGR) from FY24 to FY27E. This growth is expected to be driven by domestic expansion and recovery in exports.

The Basmati Boom

The global rice market is evolving, with a notable increase in demand for specialty rice varieties, particularly basmati. India holds a remarkable 77% share of global basmati production. Domestic consumption is projected to grow at a CAGR of 9% over the next five years, fueled by rising incomes and the expanding HoReCa sector.

With biryani becoming a staple, restaurants are ordering more basmati rice. LT Foods now generates 22% of its sales from the HoReCa segment, while KRBL sees a growing demand for bulk packs.

Way ahead…

The basmati rice industry is poised for significant growth, driven by evolving consumer preferences and rising exports. Both LT Foods and KRBL are well-positioned to capitalize on these trends, making them attractive investment opportunities. Mirae Asset Capital Markets' “Basmati Bliss” report highlights the promising outlook for these key players in Indian cuisine.

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