Multibagger: Temptation Foods Ltd

Temptation Foods Ltd.: For delicious gains
By Devdas Mogili
Temptation Foods Ltd. (TFL) is an 18-year old Mumbai based company established in 1991. It processes a variety of vegetables and fruits for the Indian markets and also exports them to some of the biggest brands in USA, UK, Europe and the Middle East. The company has one of the largest product ranges covering over 50 different types of Individually Quick Freeze (IQF) vegetables and fruits. It has 6 plants located at Sonepat, Karnal, Rudrapur, Kashipur (2 plants) in North India and Jejuri in Maharashtra. Mr. Vinit Kumar is the chairman of the company. TFL has the capacity to process, pack and IQF over 60,000 TPA of vegetables and fruits. It has an installed capacity of above 30,000 tonnes (including IQF, Blast and Plate capacities), which makes TFL the largest company with such facilities in India. Further, its own in-plant cold stores have a combined capacity of over 5,400 MT, which again make it one of the largest cold stores in India. The company procures fresh fruits and vegetables primarily from the Terai region in North India and the Agriculture Produce Market Committee (APMC) of Mumbai and Pune. All its plants are strategically located in the heart of the agricultural heartlands. TFL processes the vegetables and fruits and freezes them through the highly effective IQF technology at the plants.
The company’s revenue is principally derived from the international demand for frozen fruits and vegetables. The company also forayed into the marine food business with the acquisition of the ‘Everfresh’ and ‘Karen Anand’ brands. has now entered the domestic processed food industry with the aim of becoming a dominant player in this sector. Brands: It acquired the ‘Everfresh’ brand of frozen fruits and vegetables from the K. K. Birla Group in November 2007.
also acquired the ‘Karen Anand’ range of gourmet products and produces them at its plant in Jejuri near Pune in Maharashtra. TFL also services some of its institutional clients under the brand name of ‘Delika’. Clientele: TIL’s clientele includes Taj SATS, Ambassador, Oberoi and Dinshaws, and retail chains like Metro, Shoprite, Big Apple, Spencers, Reliance Fresh, Spinach and Food Bazar. Performance: For FY09, its sales rose by 165.22% to Rs.870.07 cr. against Rs.328.05 cr. in FY08 and net profit rose 121.34% to Rs.52.70 cr. in FY09 as against Rs.23.81 cr. in FY08. It posted an impressive EPS of Rs.20.96 for FY09.

Latest Quarterly Results: Sales declined 11.46% to Rs.225.23 cr. in Q4FY09 as against Rs.254.37 cr. in Q4FY08. However, net profit s rose 17% to Rs.15.34 cr. in Q4FY09 as against Rs.13.11 cr. in Q4FY08 and it notched up an EPS of Rs.6.10 for the quarter. Financials: The company has an equity base of Rs.25.14 cr. with a book value of Rs.93.02. It is a zero debt company with RoCE of 27.06% and RoNW of 23.32%.
Share Profile: TFL’s share with a face value of Rs.10 is listed and traded on the BSE under the B group. Its share price touched a 52-week high/low of Rs.350/18.85. At its current market price of Rs.40, it has a market capitalisation of Rs.92 cr.
Dividends: In view of its aggressive growth plans and with a view to conserve resources, the company has not declared any dividend.
Shareholding Pattern: The promoter holding in the company is 18.19% while the balance 81.81% is held by non corporate promoters, institutions, foreign holdings and the Indian public.
Prospects: With a population of 1.08 billion, India is growing at approximately 1.6% per annum. The domestic market is a large and growing market for food products as it is still the single largest component of private consumption expenditure accounting for as much as 53% of the total expenditure of Indian households. The Indian retail revolution is witnessing high growth with the growing number of modern retail stores and the larger freezer space in them. Consumer lifestyles are also changing with the increasing need for convenience and hygiene. All this will grow the latent demand for frozen and convenience foods. Further, processing enhances the shelf life of agricultural produce and thus reduces wastage. The role of food processing, therefore, becomes critical since agricultural production is targeted to double in the next 10 years.
Conclusion: TFL is an existing and profit-making company with good brands and clientele. It is one of the largest organized, listed player in its domain. At its current market price of Rs.40, the share is discounted less than 3 times its FY09 earnings of around Rs.21. Considering its aggressive growth plans, impressive performance, zero debt status, hefty book value of Rs.93, makes TFL a tempting investment opportunity for delicious gains in the medium-to-long-term. The share is quoting 50% below its book value of Rs.93, which indicates a good margin of safety for investors.

Source: moneytimes