EUR 4.08 For Business Accounts Only

Intermarket Pulse: EFOODS: Tea whitener sales looking up, but still very pricey

• In a recent meeting with EFOODS management, we learned that Lahore High Court has struck down 10% retrospective sales tax on tea whitener (for Nestle, Haleeb and Shakarganj) where Tarang may receive a similar verdict in its appeal to the Sindh High Court. As such this will remove a major overhang on the stock.
• EFOODS has intensified efforts to re-brand Tarang, recently launching media campaigns highlighting its new and improved taste. While this may allow uptick in volumes, existing market is too fragmented for Tarang to reach historical 30%+ share. Management focus on minimum pasteurization remains, however this too is a slow burner in our view.
• Possible relief on taxation puts into perspective 30%CYTD run-up in share price, but EFOODS will likely continue to face competition in the tea whitener segment. Olpers however, may surprise as competitors lag behind on perceived quality issues. While EFOODS seems attractive on P/S (CY18F: 1.97x and CY19F: 1.65x) translation bottlenecks limit impact on the bottom-line. We have a Dec’18 TP of PRs72/sh; Sell.