Sanwaria Agro Oils / Sanwaria Consumer Multibagger

Sanwaria Consumer is the new name of Sanwaria Agro Oils. The stock is already a multibagger with 523% gain over 24 months and 267% gain over 24 months.

Does the Company have the ability to give more multibagger gains to investors?

Profile of Sanwaria Agro Oils / Sanwaria Consumer

Sanwaria Consumer is one of the largest integrated food processors in India and is engaged in the business of manufacturing and processing of Soyabean, Paddy and manufacturing of other value added food products like Suji, Rawa, Maida, Chakki Fresh Aatta etc. It is presently one of the top names in the industry having its presence in various growing sectors like Renewal Energy, Infrastructure, Hospitality, Warehousing, and more prominently FMCG food processing

It was incorporated in April 1991, by Lt. Mr. Ram Narayan Agrawal and commenced its operations in 1993 with small Solvent extraction capacity of 200 TPD in Itarsi && other minor oil seeds at Industrial area, Kheda Itarsi and commenced commercial production from 5th December, 1993 and thereafter it left no stone unturned.

Currently the Company is having capacity of 2500 TPD of Solvent Extraction Plant, Soya Refinery of 250 TPD and 500 TPD of Paddy processing Plant.

The Company is recently ranked 336th in amongst 1000 India’s finest Companies on the basis of Turnover by the “The Financial Express”. In 2016, Sanwaria Agro Oils Limited was featured among India’s top 500 Companies by Dun & Bradstreet. Accordingly it has been ranked with remarkable achievement at 269th for Income, 413th for Net Profit and 472nd for Net Worth. It was ranked in top 500 companies in 2014 for income, 318th in 2013 and 389th in 2012 for its Net Profit; 428th in 2013 and 439th in 2012 for Net Worth by “Manappuram Finance Limited”. Then in 2008; the Company was awarded “Global India – 2008” as the fastest emerging company in the Northern India. In March 2005, Sanwaria Agro Oils received “Outstanding Achievement Award in Export” by FMPCCI. The Company has also received ‘BEST CAPACITY UTILIZATION AWARD’ from SOPA from financial year 98-99 to 2001-2002 had achieved 103% capacity utilization as against the Industry average of 35 %. The expansion of the capacity was wholly financed by internal accruals. The Sales & profit of the company is also at constant move in upward direction which in turn has created a strong standing of Sanwaria Agro Oils in the FMCG Industry.

The Company started with regional presence and has grown up worldwide. It is ISO 14001, 22000, Halal Certified, “Good Manufacturing Practice” (GMP) as per the norms laid down by WHO and has been certified by U.K. Certification and Inspection Limited, and Government Recognized Trading House by DGFT & now the company is aiming at the Star Trading House status. It had been honored with ‘THE NIRYAT SHREE SILVER AWARD’ for the financial year 2001-02 by the President of India, Mr. K.R. Narayan organized by the Federation of Indian Exports Organization for Export excellence. It is ongoing thirst for exports & its decision to concentrate on brand building for its whole range of products, the company had launched its full range of its food products under the brand names “SULABH”, “NARMADA” & “SANWARIA”. The Company has recently introduced Basmati rice in Dubai under the brand name of “NASHIRA”. “Sulabh” and “Sanwaria” is the lower segment brand to attract the lower middle class while “Narmada” and “Nashira” is the premium segment brand to attract middle and upper middle class consumer. After receiving favorable response from customers & constant increase in demand of the retail packs, The Company has launched 1, 2 5 and 15 litre/Kg consumer packs in pouch, tin & jar , to continue its ongoing process to outperform the Industry.”

Sanwaria has adopted strategy to convert its conventional commodity and agro based business into an FMCG Business by adding new product range like like Suji, Maida, Dalia, Besan, Chakki Fresh Atta, Poha, Soya Flour, Sugar Pulses and packaged food, etc. and with upcoming products including Tea, Mustered oil, Soya Pasta.

Company’s premium products basket consist of:

•Basmati Rice (Exotic & Premium- Raw/Sella)
•Refined Soyabean Oil, Refined Rice Bran Oil/ Fortified with vitamins,
•Chakki fresh Atta fortified with Soya Flour
•Chakki fresh fortified Protein & Iron rich Atta
•Maida, Suji, Rawa, Besan, Daliya, Pulses (Dals),
•Soya Flour, Soya Chunks (Bari)
•Salt, Sugar, Poha
•Soya Meal, Soya Meal High Protein
•Rice Flour, Lecithin
•Aqua Feed
•Poultry Feed and others

The Company is foraying into direct retail by opening up company owned retail outlets under the brand name ‘Sanwaria Kirana’ to reach the end customer directly. The Company has already opened up 11 stores at different locations of Madhya Pradesh and another 10 retail stores are in pipeline. It is venturing into different geographical locations through Franchise Route. It has a plan of opening 100% subsidiary in Dubai to get the overseas market business of Middle East & Africa and initiate the business in Singapore through 100% Subsidiary which will get business from rest of the world along with cheaper finance facilities.

INDIAN FOOD PROCESSING INDUSTRY OVERVIEW

The Indian Food Industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.
The food industry, which is currently valued at US$ 39.71 billion; is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$ 65.4 billion by 2018. Food and grocery account for around 31 per cent of India’s consumption basket.

Accounting for about 32 per cent of the country’s total food market, The Government of India has been instrumental in the growth and development of the food processing industry. The government through the FY15

Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 per cent export oriented units.

Market Size: The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food retail market is expected to reach Rs 61 lakh crore (US$ 915 billion) by 2020.

The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 14 per cent of manufacturing Gross Domestic Product (GDP), 13 per cent of India’s exports and six per cent of total industrial investment. Indian food service industry is expected to reach US$ 78 billion by 2018.

Government Initiatives: Some of the major initiatives taken by the Government of India to improve the food processing sector in India are as follows:

•In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth Rs 8,000 crore (US$ 1.2 billion).

•Union Budget 2016-17 proposed 100 per cent FDI through FIPB (Foreign Investment Promotion Board) route in marketing of food products produced and manufactured in India.

•The Government of India has relaxed foreign direct investment (FDI) norms for the sector, allowing up to 100 per cent FDI in food product e-commerce through automatic route.

•The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs 482 crore (US$ 72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food testing laboratories and setting up 62 new mobile testing labs across the country.

•The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best practices for research in fertilizer sector, which will enable farmers to get good quality fertilizers at affordable rates and thereby achieve food security for the common man.

•The Government of India allocated Rs 1,500 crore (US$ 225.7 million) and announced various measures under the Merchandise Exports from India Scheme (MEIS), including setting up of agencies for aquaculture and fisheries in coastal states and export incentives for marine products.

•Government of India plans to allow two Indian dairy companies, Parag Milk Foods and Schreiber Dynamic Dairies, to export milk products to Russia for six months, after these companies got approval for their products by Russian inspection authorities.

•Ms Harsimrat Kaur Badal, Union Minister for Food Processing Industries, Government of India inaugurated the first of its kind Rs 136 crore (US$ 20 million) mega international food park at Dabwala Kalan, Punjab. She has also expressed confidence that the decision to allow 100 per cent Foreign Direct Investment (FDI) in multi-brand retail with 100 per cent local sourcing condition, will act as a catalyst for the food processing sector, thereby controlling inflation, uplifting the condition of farmers, and creating more jobs in the country.

•FSSAI has issued new rules for importing products, to address concerns over the entry of sub-standard items and simplify the process by setting shelf-life norms and relaxing labeling guidelines.

India Rice Overview:

India is one the major rice producing, consuming and exporting countries in the world. India continued to be the world’s largest rice exporter for the fourth consecutive year. It has a significant competitive edge in rice exports due to combination of external factors, domestic market dynamics, high yielding and better paddy quality, low cost of paddy production and efficient execution of contracted business both form east and west coast ports of India. India’s rice industry has seen a transformation in the last decade, with growth of branded business in the domestic market and a strong 20% and 30% in value terms over the last four years. India is also the world’s largest exporter of basmati rice to the global market with major destinations being Saudi Arabia, Iran, United Arab Emirates, Iraq and Kuwait. India is also the largest player in export of Non-basmati Rice. Key markets in the non-basmati segment are Benin, Bangladesh, Senegal, South Africa, Liberia and Cote d’ Ivoire.

Indian rice industry has developed a strong position in exports, reaching 25% of market share of global trade.

Domestic business has also become more attractive in India with growth in branded rice and modern retail.

Due to its importance as an essential food grain with price sensitive, rice in the past was perceived as a low engagement category form the consumers’ buying perspective. Driven by increase in disposable incomes, urbanization, women’s participation in the workforce and a younger population, consumer lifestyles have changed over the last one and a half decades. People now have a higher propensity to spend, paired with a desire for convenience and increased availability and access to quality products.

The cereal segment is seeing traction towards better quality and premium products. This is evident in the rice category, as consumers are shifting their purchasing patterns from loose rice to packaged, branded products with better color, grain size and improved post –cooking attributes, such aroma and taste.

Indian Basmati Rice Overview:

Basmati Rice, grown only once a year, is considers amongst the finest rice globally. It is a Kharif crop cultivated in the Indo-Gangetic plain. India and Pakistan are the sole suppliers of basmati Rice as it can only be cultivated in these regions.

Basmati Rice accounts for a small proportion of the total rice produced in India. Despite this, india is a global leader in Basmati Rice production accounting for 70% of the total global production. In the FY 2015-16, basmati rice accounted for only 9.46% of the total rice production, whereas in export value terms its share was higher at 60%. India exported 40.44 Lacs MT of Basmati Rice in FY 2015-16 with a value of Rs. 22,714 Crores. Apart from basmati Rice the exports of all major commodities in FY 2015-16 declined. Lower prices and strong demand from West Asian countries boosted Basmati Rice exports during the year. Moreover, the lifting up of bn on Basmati Rice imports by Iran further contributed to exports growth. Iran accounted for nearly 38% of India’s basmati Rice exports in FY 2013-14. However, the country imposed a ban on rice imports from India during October 2014 to December 2015 leading to a decline in India’s basmati Rice exports In FY 2014-15. Thus, resumption of the trade is a major boost for the Indian basmati Rice industry.

Future Outlook of Sanwaria Agro/ Sanwaria Consumer:

As a visionary and future –focused organization, SAOL promises a continuing success story during the coming years. The Company is looking at increased sales and higher return on equity on the back of its bean power.

With a robust financial position and balanced leveraged only to the extent of its working capital, the Company is well positioned to surge confidently ahead to further augment growth.

Strengthening the farmer’s relation and continued investments in building the HR component will further enhance the Company’s competitive position in the industry, domestically and globally.

Key Investment Highlights:

Presence in a large and fast growing segment:

The Company is amongst the top food producers of soya/Paddy/Wheat products in India.

The Group has sustained exposure in trading of food grains and pulses apart from soyabean products, wheat products, rice , oils and other food products.

Location Advantage:

The company’s operations in the heartland of the soya & Paddy & wheat belt of India gives it a major locational advantage reducing the logistics costs substantially.

The plants are located in Madhya Pradesh which is a power surplus state and hence the Company has access to cheap and uninterrupted power supply.

The region has good access to skilled and semi skilled labour.

Strong procurement capabilities:

The Promoters of the Company have been in the business for over 45 years, enabling it to establish a very strong and efficient procurement system.

It has strong relationship with farmers with 80 direct procurement centers across Madhya Pradesh wherein the farmers bring their crop and the company purchases directly from farmers.

The Company also procures goods from international markets to meet its requirements of soya oil.

Road ahead for Sanwaria Consumer/ Sanwaria Agro

The Company with the focus of becoming a leading FMCG player in the next few years, intends to leverage its strong procurement and marketing network to capture the sub segments of the growing National and International food market.

The Company is foraying into direct retail by opening up company owned retail outlets under the brand namE ‘Sanwaria Kirana’ to reach the end customer directly. The Company has already opened up 11 stores at different locations of Madhya Pradesh and another 10 retail stores are in pipeline.

The Company is venturing into different geographical locations through Franchise Route.

Change in management strategy to diversification and growth

Opening 100% subsidiary in Dubai to get the overseas market business of Middle East & Africa.

Starting business in Singapore through 100 %Subsidiary which will get business from rest of the world along with cheaper finance facilities.

Net Sales and PAT of the Company are expected to grow at a CAGR of 13% and 35% Over 2015 to 2018E, respectively.

EBIDTA Margins are expected to increase due to improvement in manufacturing efficiency, increase in sale and change in product mix.

SANWARIA CONSUMER LTD – KEY FUNDAMENTALS

PARAMETER VALUES
MARKET CAP (Rs CR)   1,678
EPS – TTM (Rs) [*S] 0.90
P/E RATIO (X) [*S] 25.33
FACE VALUE (Rs)   1
LATEST DIVIDEND (%)   5.00
LATEST DIVIDEND DATE 25 SEP 2017
DIVIDEND YIELD (%) 0.10
BOOK VALUE / SHARE (Rs) [*S] 5.80
P/B RATIO (Rs) [*S] 3.93

[*C] Consolidated     [*S] Standalone    

SANWARIA CONSUMER LTD – FINANCIAL RESULTS

PARTICULARS (Rs CR) SEP 2017 SEP 2016 % CHG
NET SALES 1224.39 673.58 81.77
OTHER INCOME
TOTAL INCOME 1224.39 673.58 81.77
TOTAL EXPENSES 1179.41 646.33 82.48
OPERATING PROFIT 44.98 27.25 65.06
NET PROFIT 21.05 6.59 219.42
EQUITY CAPITAL 73.61 34.81

One thought on “Sanwaria Agro Oils / Sanwaria Consumer Multibagger

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: