Vadilal Industries Limited.
Vadilal Industries Limited, as one of the largest manufacturer brand of Ice cream having a legacy of nearly 4 generations. Company has emerged as one of the leading processed food players in India exporting frozen vegetables, ready-to-eat snacks and many more.
Company involves in the vertical integrated business beyond food and ice cream like Chemicals, Dairy, Real –Estate & Forex.
Products Classifications
Ice-Cream: Company is serving the business from last 80 years have been remained at TOP 3 brands on back of continuous innovations on technology front as well as on flavors front. Well Known Brands – Ice Toppers, Bada-bite, Gourmet, etc…
Dairy Business: Company has recently launched new product – Power SIP – Flavored Milk, addition to that company has introduced – Ghee & Paneer.
Ready-to-Eat- Under the category company has huge basket of frozen food line and exited from low margin business of mango pulp, which shows company is aggressively working on the high margins products, which would help the company to increase the profitability. Products like – Green Peas, Parathas, Curries, Snacks and many more.
Investment Rationale:
- Strong Management – Company has strong management who believes to mark the Company under the Brand of “ INDIAN MNC”. Company has strong legacy of stable management, which is managed by 4th generation promoter family. Recent, dispute under the family has raised questions for the generation legacy but we believe that would not impact negative under the running process of the business.
- Unique Products: Company has unique product portfolio in which it has been ranked in Top three brands – Like company is the second largest manufacturer of Ice cream by volumes having 150+ flavors.
Company is strongly enjoying its listing on bourses as peers like AMUL, HUL (very low contribution of ice cream), Basking Robbins, London Dairy and many more which are not listed creates a monopolistic business being on the bourse.
- Recent steps taken by company shows company would exit from low margins business wherein they have closed mango pulp business and now focusing aggressively on higher margins business like – Increase capacity of Ice cream business, New products launch in Ready-to-Eat segments, expanding business in foreign countries where margins are high and competition is less (focus in Africa, European markets and many more).
- Expansion Plans: Company plans to expand its products markets to North, North-East where the presence of the company stays very low. While on the rural front also company plans to increase its presence by targeting 5,000 new outlets in the upcoming 12 months.
On Global front – Company plans to expands it current global business selling from 45 countries to 55 countries with adding new products under frozen food line.
- Changing Demand Patterns: Last few years have shown significant change in consumer preference for Ice cream where change of consumption has taken place from seasonal consumption towards the yearlong consumption.
- Per Capita Consumption: India lags behind go the global standard of per capita consumption of ice cream. In India per capita consumption is just 300 milliliter, which is significantly lower than the western countries, which is 24-25 liters per person per annum. India stands lower than Pakistan where it is 600 millimeter per annum.
Financials:
- Company has small equity of just Rs 7.2 crore with revenue of Rs 403 crs on yearly basis.
- Debt obligation on the company is low and management if confident to reduce it soon by utilizing the free cash flow, which indirectly would increase the profitability as well as the bottom numbers of the company in coming quarters. Interest of debt outflow is just Rs 25 crores on yearly basis and we believe in coming years to come down by nearly Rs 7 – 8 crs till 2017.
- In Current financial year till December ending company has already achieved the revenue of Rs 481 crores where in major contribution comes from Ice cream business followed by processed foods business, During 9M FY16 company has already beats its last full years financial in all terms like – Revenue, EBITDA & Profits. Any major outperformance on the financials front in March quarter would be the boost for the company to reduce its debt as well as to beat the guidance levels.
In a nutshell, Vadilal Industries falls into the Value Pick – on back of Strong Management, Monopolized Business Segment & Strong Financials (Low Debt Burden).
