PATANJALI: CMP: 1703 CYear Gr:-8%, Long Term Gr: 10% | Q1_Fy25 Result Update
(Muted Growth but strong profitability due to improved margins after long declining margin trend)
### Company Overview
Patanjali Foods Ltd, formerly known as Ruchi Soya Industries Ltd, is a manufacturer of consumer-packaged foods in India. Ruchi Soya Industries was founded in 1986 by Dinesh Sahara, to manufacture Soybean edible oil until the whole company was purchased by the Widjaja family of Indonesia in 2014. In December 2017, Ruchi Soya Industries entered into insolvency because of its total debt of about ₹12,000 crores. In December 2019, Patanjali Ayurved acquired the bankrupt Ruchi Soya for ₹4,350 crore. In June 2021, Ruchi Soya acquired the biscuits and noodles business of Patanjali for ₹60 crore. It acquired the food business of Patanjali Ayurved for around ₹690 crore in May 2022. The company changed its name to Patanjali Foods in June 2022.
Patanjali Foods Limited is now a leading FMCG player in India. The company operates in the segments of Edible Oils, Food & FMCG, and Wind Power Generation with a portfolio of brands like Patanjali, Ruchi Gold, Mahakosh, and Nutrela.
### Industry Overview
Patanjali Foods Limited operates in the FMCG industry, focusing on edible oils, food products, and renewable energy. The company has faced challenges in the edible oils segment due to price volatility but has implemented strategies to stabilize performance.
### Peer Group Comparison
- Major peers include companies like Adani Wilmar, Marico, and Dabur, which also operate in similar segments of edible oils and FMCG products.
### Historical Performance
*RuchiSoya Era:* RuchiSoya were doing turnover of around 2000 Cr and Profits of 20 cr during the year 2000. We saw strong growth with the sales reaching 31000 Cr in 2012 which was more than even HUL. But the Profitability was not so good due to the high debt burden. Even during Fy_2012 the company's debt was more than total equity which was an alarming signal for investors. High debts were eating profits and during the fy_2016 company posted more than 1000 Cr losses and thereafter this continued till the whole equity was drained and negative along with borrowings reaching to 8000 Cr. This was the reason Ruchisoya entered into Insolvency. Due to such mismanagements Sales also decreased from 31000 Cr to just 12000 Cr in the year 2019.
*Patanjali Era:* Patanjali entered the picture in fy_2020 and thereafter we saw the company again on fast track and better management. Sales have grown again from 13000 Cr to 31000 Cr last year. Profitability has grown from losses of 6000 Cr to lifetime high profits of 800 Cr last year. Total equity is again at a lifetime high while borrowing is at 13 years low. Debt to equity is now normal at 15%. The food business is highly optimistic. They are 2nd largest in Oil only after Adani Wimar, they are 4th largest in Biscuits and emerging in several brands.
### Q1 FY25:
### Sales and Profit Growth
#### Revenue
- Q1 FY25: ₹7,173.06 crore
- Q1 FY24: ₹7,767.10 crore
Degrowth of (-7.7%)
#### Profit
- EBITDA for Q1 FY25: ₹435.08 crore (up from ₹211.99 crore YoY)
- EBITDA Margin: 6.07% (up from 5.08% QoQ)
- PAT for Q1 FY25: ₹262.90 crore (threefold increase YoY)
### Profit Margins
- EBITDA Margin: 6.07%
- PAT Margin: Significantly improved, reflecting threefold increase in PAT YoY.
### Segmental Growth
#### Edible Oils
- Revenue: ₹5,330.33 crore (down from ₹5,890.73 crore in Q1 FY24)
- EBITDA: ₹231.63 crore (recovered from a loss of ₹99.61 crore in Q1 FY24)
- Volumes: 5.74 lac MT
#### Food & FMCG
- Revenue: ₹1,953.55 crore (flat YoY)
- EBITDA: ₹184.05 crore (down from ₹360.77 crore in Q1 FY24)
#### Wind Turbine Power Generation
- Revenue: ₹14.33 crore
- Contribution to total energy requirements: ~20%
### Important Financial Ratios
- EBITDA Margin: 6.07%
- PAT Margin: Significant YoY improvement
- Earnings per Share (EPS): ₹7.26
### Action
We may see muted sales growth of near to negative 5% this year but profits could shoot up by 39% after a long time of falls in Profits. New buying again can be done during any fall near 1306 while target for this or next year could be 2175 where some 5% profits can be booked.
### Future Outlook
- The acquisition of Patanjali Ayurved Limited's Home and Personal Care business is expected to enhance the company's FMCG portfolio and contribute to revenue and EBITDA growth.
- Continued focus on expanding the biscuits division, Nutrela TVP, and premium product ranges.
- Emphasis on e-commerce and quick commerce channels for growth.
We may see Patanjali cross the landmark 50000 Cr of sales in the next 5 years while Profits may cross the 1000 Cr benchmark this year itself. Multiyear rally could be seen here, but as edible oil prices are high volatility, profits could stay high volatile.
### Conclusion
Patanjali Foods Limited has demonstrated strong growth in profitability and has implemented strategies to stabilize its performance amidst market volatility. The acquisition of the HPC business is a strategic move to strengthen its FMCG portfolio and drive future growth. The company's efforts in expanding its product range and focusing on new-age channels like e-commerce are expected to further enhance its market position.
### Disclosure:
Do not buy or sell before watching the data on your own, we are not a tip providing company.
