ATF -- National Foods Limited.

<< < (22/28) > >> MZ: National Foods: inching closer to Vision 2020

One thing that has kept NFOOD a cut above the rest within FMCG sector is the firms strong focus on keeping a sharp check on operational costs. The firms management has always run a pretty tight ship and the proof is in the numbers as National Foods does what it knows best: giving a rock solid performance even as the rest of the food sector is busy hitting a rough patch. The last few months have largely been characterised as a slow time for the FMCG sector; with demand for packaged food having remained lukewarm, despite the fact that the busiest time of the year for food producersi.e. Ramzanhappened to fall right in the middle of the quarter. While domestic turnover for National Foods during the period was flat, a strong presence in the markets with heavy South Asian Diaspora has been helping the firms export sales, which have strengthened during the period, going up by 9 percent year on year to hit Rs191 million at the end of 1Q FY14. Further help to the firms margins came in the form of containment in the cost of sales. Analysts report that at the back of Nationals steady margins is an old school commitment to keep a check on fixed costs, creative cash generating initiatives and a cautious approach to portfolio expansion. During the last few quarters, Nationals distribution and selling expenses has been the only category that has shown a significant hike. And that too only because the companys management made a conscious decision during the last quarter to rise spending on advertising and promotion keep up with the rising wave of competition. Consequently, some of Nationals more obscure product linessuch as the powdered drink segmenthave picked up pace and are doing better than ever. Talking to BR Research, company representatives reported a strong volumetric growth in the firms recipe mix and sauces category. Additionally, National Basmati Rice, which was launched in various key markets with new packaging, has also been successful in obtaining a chunk of the branded basmati rice market and the firm expects a steady volumetric growth in the rice segment during the coming quarters. NFoods steady performance moreover has not gone unnoticed at the countrys top

bourses. Having crossed the Rs1 billion revenue threshold at the close of the previous quarter, Nationals stock has gained considerable traction as its stellar growth garners investor attention. Sateesh Balani from Elixir Securities reports that return on the firms stock is at a healthy 94 percent and has outpaced returns on both Nestle and RMPL at the close of the 3Q FY13. Going forward, the overseas market still remains the biggest white space for the firm and the upcoming quarters will see the firm expanding its reach into the American and European markets in a bid to get closer to its ambitious Vision 2020, which foresees the firm crossing the threshold of Rs50 billion in revenues by the close of this decade. ============================ NATIONAL FOODS LIMITED =========================================================== =========== Rs (mn) 1QFY14 1QFY13 chg =========================================================== =========== Sales 2,475 2,349 5% Cost of sales 1,540 1,519 1% Gross profit 935 829 13% Gross profit margin 37.78% 35.29% 2.49 ppt Distribution & selling expense 506 402 26% Administrative expenses 80 70 14% Other operating expenses 22 29 -24% Finance cost 24 18 33% NPAT 217 200 9% EPS (Rs) 5.25 4.82 ---------------------------------------------------------------------Source: KSE notice ========================================== apple: domestic sales figure not impressive, it need to introduce new line of product like "ready to eat packaged food" as disclosed by chairman in last analyst briefing, plus need to enhance its distribution channel in rural areas which still has lots of potential and will help them to achieve their vision of 2020. Although company is focused on export segment but margins are low there due to higher "freight & forwarding cost + greater competition". stockz_123: National Foods: Growing overseas sales stretch GP margin ...BUY maintained... NATF reported 1QFY14 EPS of Rs 5.25/sh, against Rs.4.83/sh is same period last year. Neither cash dividend nor bonus is announced for this quarter.

The PAT increased to Rs 218mn showing 9% growth over the last year profit of Rs 200mn. The gross profit margin remained high i.e. 37.8% in 1QFY14 stretched by 2.5% from last year's 1Q gross margin of 35.3% which we believe is due to the expending overseas business and deprecating PKR. Operating margin and net profit margins remained almost flat thus eroded more earnings propensity in the eyes of investing public. Other Income is increased by 38%, company posted Rs 28mn as other income in 1QFY14 against Rs 20mn in corresponding period. Company's finance cost is also increased by 31% during 1QFY14, this incremental finance cost is adjusted by higher other income portion and does not negatively impacted on NPAT. Empowering brand image in local market... NATF's local and export sales are growing with good speed; company reported 5% sales growth to Rs 2,475mn in 1QFY14 against Rs 2,349mn in last year same period. The brands preference among local customers in empowered by creating new marketing strategies under new campaign to promote the localization in their products, in tagline of "Hamare Khane , Hamara Piyar" Valuation- Lower PE multiple... Growing wings in overseas business, and promoting localization in its marketing strategies, we see sales will further increase in coming days and we expect NATF may report year end earning in the range of Rs 23- 25 for FY14, and yields leading PE of 13.5x and historical PE of 22x. We maintain BUY.