Patanjali Foods has been on a strong upward trend over the past three months, with its share price increasing by more than 25%. This bullish momentum has attracted attention from market analysts and investors alike.
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Patanjali Foods Brokerage Recommendation
Systematix Institutional Equities, a respected brokerage firm, has initiated coverage on Patanjali Foods with a ‘BUY’ rating. The firm has set a target price of ₹2,259, suggesting a potential upside of 25% from the stock’s opening price of ₹1,800.05 per share on the BSE as of Tuesday.
Revenue and Margin Projections
The brokerage is optimistic about Patanjali Foods’ future, forecasting that the company could surpass ₹40,000 crore in revenue by FY27, with an expected margin of 8.5%. This growth is anticipated to be driven by the company’s expanding presence in the FMCG sector.
FMCG Business Growth
Systematix also predicts that the contribution of the FMCG (Fast-Moving Consumer Goods) business to Patanjali Foods’ overall revenue will increase significantly. They expect the FMCG segment to account for 41% of revenue by FY27, up from 30% in FY24.
Patanjali Valuation
The brokerage values Patanjali Foods at 40 times its projected earnings for FY26. This valuation is at a 20% discount compared to its FMCG peers, who typically trade at 50 times their estimated earnings. Despite the discount, the firm believes Patanjali Foods is poised for significant growth in the FMCG sector.
Patanjali Growth Drivers
Systematix identifies several key drivers behind Patanjali Foods’ expected growth:
- Market Leadership: The company is a pioneer and market leader in the branded textured soy protein sector.
- Synergies: Strong synergies with its food and HPC (Home and Personal Care) portfolios are expected to contribute to growth.
- Promoter Support: The backing of the Patanjali group’s strong promoter pedigree adds to the company’s credibility and growth potential.
- Premium Portfolio Expansion: The improvement of the high-margin premium food portfolio, particularly through the Nutrela brand, is seen as a key growth area.
- Nutraceuticals Growth: The company is also accelerating growth in its high-margin nutraceuticals segment.
- Diverse Market Presence: Patanjali Foods is well-positioned across mass, value, and premium market segments, ensuring broad market reach.
Stock’s Recent High
Patanjali Foods’ stock recently hit a 52-week high of ₹1,844 per share on the BSE. On Monday, the stock traded with an intraday high of ₹1,812.85 and a low of ₹1,787.
Technical Analysis
Ruchit Jain, Lead Research Analyst at 5paisa, noted that Patanjali Foods’ stock has formed a higher top-higher bottom structure, which indicates an ongoing uptrend. He suggests that the 40-day Exponential Moving Average (DEMA) at ₹1,650 is a strong support level in the near term, and recommends a buy-on-dip strategy for traders.
Key Risks
Despite the positive outlook, Systematix outlines several risks that could impact the company’s performance:
- Edible Oil Price Volatility: Fluctuations in edible oil prices could affect profitability.
- HPC Business Integration: Challenges in integrating the HPC business could pose risks.
- Execution Challenges: Potential difficulties in executing the planned growth and margin strategies, including obtaining necessary regulatory approvals, could impact the company’s projections.
1. What is driving the recent growth in Patanjali Foods’ share price?
Patanjali Foods’ share price has seen a significant upward trend due to its strong performance in the FMCG sector, coupled with a bullish outlook from brokerage firms like Systematix Institutional Equities. The company’s strategic expansion in high-margin segments like premium foods and nutraceuticals, along with improving profit margins, has further fueled investor confidence.
2. What are the key growth drivers for Patanjali Foods?
The key growth drivers for Patanjali Foods include its leadership in the branded textured soy protein market, synergies with its food and HPC portfolios, expansion of its high-margin premium food offerings through the Nutrela brand, rapid growth in the nutraceuticals segment, and its diverse market presence across mass, value, and premium segments.
3. What risks could affect Patanjali Foods’ future performance?
Several risks could impact Patanjali Foods’ future performance, including volatility in edible oil prices, challenges in integrating the HPC business, and potential difficulties in executing growth and margin strategies. Regulatory hurdles could also pose a risk to the company’s expansion plans.
4. How is Patanjali Foods positioned in the FMCG sector compared to its peers?
Patanjali Foods is valued at 40 times its estimated earnings for FY26, which is a 20% discount compared to its FMCG peers, who trade at an average PE ratio of 50 times. Despite this discount, the company is expected to achieve substantial growth in the FMCG sector, driven by its expanding product range and distribution network.
5. What is the price target for Patanjali Foods’ shares as per Systematix Institutional Equities?
Systematix Institutional Equities has set a price target of ₹2,259 for Patanjali Foods’ shares, indicating a potential upside of 25% from the current share price. The brokerage firm is confident in the company’s ability to achieve robust revenue growth and improve profit margins in the coming years.