The company is confident of generating Rs 350 crore in revenue from this business in this financial year, increasing it to Rs 500 crore in 2021-22.
Additionally, analysts are confident of improving demand abroad. “International business, which is roughly 20 per cent of its overall top line, is largely concentrated in countries such as Bangladesh and Vietnam, which have very similar demographics as India. The company has undertaken steps to diversify its product portfolio, offer better pricing, etc, which we believe should translate into better performance in the medium term,” said Himanshu Nayyar, research analyst, YES Securities.
Stock valuation, too, is reasonable, say experts. At 42x on a 12-month forward basis, the stock trades at a discount of 12 per cent to its five-year average price-to-earnings multiple of 48x.
According to Bloomberg, all the six analysts polled in December have a “buy” on the stock with an average target price of Rs 437.
Increase in prices of key raw materials such as copra, sunflower, and rice bran as compared to modest price hikes is seen affecting the company’s gross margins, according to analysts at Sharekhan.
However, cost optimisation efforts undertaken could restrict any severe contraction in margins. Demand slowdown and increased competition in highly penetrated categories are the other typical key risks.