KRBL in Q4FY17 posted revenues of Rs 913 Cr. (up 28% YoY, up 14% QoQ), on account of 26% volume growth in the overall rice production. Due to brand strength, lower cost of material consumed, higher price realizations in domestic market and other efficiencies, KRBL recorded PAT of Rs 110 Cr. (up 18% YoY, down 1% QoQ).
With 25% growth in the domestic market in FY17, KRBL currently enjoys a market share of 32% in rice production. KRBL due to its financial strength and storage capability has an inventory worth Rs 1910 Cr (paddy and rice) which provides revenue visibility.
We believe changes in consumer preference towards branded Basmati rice in domestic market, Iran resuming purchases and entry into premium health foods segment augurs well for KRBL’s earnings. We value KRBL at 20x FY19E EPS and maintain BUY recommendation with a Target Price of Rs. 440
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