Tuesday, June 26, 2018

Jhandewala food limited inside

Jhandewala Foods : CMP 60/- Market Cap : 62 Cr

JFL belong to a family of 4th generation player who has more than 125 years of experience in selling Ghee . Over the years the company has expanded its portfolio from being  a single product player to a diversified FMCG company. The company's current product portfolio includes desi ghee, Godhenu Cow Ghee, Naman’s Gold Ghee, Poha, Mangodi, Daliya, Boondi Raita, Saffron, Papad & Polki Refined Groundnut Oil etc.


As per FY17 numbers, the company has posted topline of INR 1.48 bn with EBITA of INR ~89mn with PAT of INR 22.5mn.


Strong presence in Rajasthan: The company has strong presence in Rajasthan with presence of 11000 retail stores with close to 400 distributors in the state. The company is now expanding into newer geographies like NCR, Gujarat & Jammu kashmir etc. The company has also started exporting to middle east in small manner.

Market share to increase going forward: In the ghee segment, the company has presence close of  4 pc market share in the state which is largely controlled by unorganised players, (70 pc share controlled by unorganised players) we believe JFL with its strong brand presence, attractive pricing point (basic ghee sold at lower than leading players like amul despite of better quality due to better operational efficiencies is in sweet spot to gain market share from unorganised players. We believe with increasing  shift towards organised  play due to improve lifestyle, change in business dynamics due to GST, counter feiting measures by Government. The company is poised to gain higher market share and likely to witness good growth rate.


Lower SNF butter fat prices : The company procures 80 pc of its raw material from Rajasthan and UP which has excess supply of milk and it would lead to lowering of input prices and steady supply of raw material prices.


Ground nut oil segment to drive growth : The company has entered into  We believe company dont have to sell much on distribution network as network of oil and ghee are almost same. The company can leverage its strong presence in ghee to built up its clients base and lower distribution expenses. The company has hired top personal from a leading FMCG company to lead its FMCG division. The management is expecting atleast 100 crores sales from ground nut oil segment by FY20.


Strong and Professional team: The company has been managed by strong and professional managed team despite being a smaller but growing player in segment. The company has hired ex CEO of Amul Dairy as consultant to drive its Ghee business.


New products: The company has diversified and entered into new segments like Poha, Papad, Saffron and Mangodi etc. As per management, they are selling 3  million packs of Poha only in Rajasthan and rest of the products are also accepted by market very well. The company is targetting INR 50 crores by FY20 from INR 15crores in FY17 respectively.



Margins : We believe margins to remain stable in FY19 due to expenses in ground nut oil segment and likely to gain by 200 bps in FY20 respectively. We are estimating margins to touch 8 -8.5 pc by Fy20 respectively.


Valuation: We believe company can deliver healthy growth rate going and revenue to touch INR 350 crores and Ebidta of INR 25 crores and Pat of 12 crores in FY20 respectively. We believe company can be valued at 1.5x Fy20 revenues and can achieve market cap of 525 crores at those levels and can touch 500 plus in next 2 years.