If you are also planning to include a strong FMCG stock in your portfolio, then Patanjali Foods can prove to be a great option. The world’s famous brokerage firm Jefferies has expressed its confidence in the shares of this company and has given it a rating of ‘Buy’. The brokerage believes that this stock can give excellent returns of up to 60 percent to investors in the coming time. At present this share is trading around Rs 351 in the market, in view of which a bigger target of Rs 560 has been set for the future.
Strong expectation of great returns
Jefferies has made very positive predictions about the financial future of Patanjali Foods. According to the brokerage report, this stock is currently trading at a valuation of about 23 times the expected earnings for the next 12 months. Experts’ mathematics says that between the financial year 2026 and 2029, the company’s profit (PAT) can increase at a compound annual growth rate (CAGR) of 23 percent. Apart from this, the company’s return on capital (ROCE) is also expected to improve by 590 basis points, due to which this figure can reach 18 percent. Based on these strong figures, Jefferies has set a target of Rs 560 for this stock through the ‘Sum-of-the-Parts’ (SOTP) model.
Bumper results of the first quarter
The company has recently presented its first quarter (FY27) results, which surprised even the market experts. During this period, the total revenue of Patanjali Foods crossed Rs 11,300 crore with a strong jump of 29 percent. The special thing is that this earning figure was about 20 percent more than Jefferies’ estimates. Talking about profits, the company’s EBITDA has registered a spectacular increase of 69 percent and its net profit has increased by 86 percent. These figures clearly show that the company’s business is growing rapidly in the right direction.
Edible oil business becomes savior
The most important contribution behind this huge success of Patanjali Foods is its edible oil business. This segment has given its best performance so far. Its revenue has increased by 27 percent to Rs 8,500 crore. Especially a huge increase was seen in the demand for mustard oil. The direct benefit of the increase in oil prices due to the ongoing tension in West Asia and inflation in the commodity market is visible in the company’s profits. The EBIT of this part has increased almost five times on an annual basis. At the same time, the company’s plantation business has also increased by 25 percent, whose cultivated area has now spread to 1.16 lakh hectares. The management has set a target of achieving 3 to 5 percent growth in the volume of edible oil in the next financial year.
Growing strength of FMCG business
Apart from oil, the company’s foods and FMCG business is also expanding rapidly. An impressive growth of 28 percent has been recorded in the revenue of this segment. In this, the biscuit business has performed amazingly and earned Rs 560 crore. Its margin has also increased to 15.4 percent. However, due to expensive raw materials, there has been some pressure on the profits of this segment as the company could not pass the entire burden of increase in costs directly on the customers. Nevertheless, Jefferies is hopeful that in the future, when raw material prices will normalize, the margins of this business will also see a big improvement.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
