MOSL: FUTURE CONSUMER (Buy)-Long runway of growth justifies expensive near-term valuations
Future Consumer: Long runway of growth justifies expensive near-term valuations
(FCON IN, Mkt Cap USD1.6b, CMP INR56, TP INR76, 36% Upside, Buy)
- Future Consumer’s (FCL) net sales grew 51.3% YoY to INR8b (est. of INR7.7b) in 4QFY18. EBITDA rose 521% YoY to INR162m (est. of INR190m). The company reported a loss of INR36m (est. of profit of INR58m).
- Gross margin contracted 80bp YoY to 12.8% (est. of 14.1%), mostly due to faster growth in the lower-margin fruits & vegetables business. Operating leverage due to strong sales growth led to a decrease in other expenses (-160bp YoY to 7% of sales) and staff costs (-70bp YoY to 3.8% of sales). Thus, EBITDA margin expanded 150bp YoY to 2% (est. of 2.5%).
- FY18 performance: Sales and EBITDA grew 42% and 458.9%, respectively. FCON’s loss reduced to INR260m in FY18 from INR610m in FY17. Gross margin was flat, while EBITDA margin expanded 130bp YoY to 1.8%.
Future Consumer Ltd, formerly Future Consumer Enterprise Ltd, is a holding company. It is a food company, which is engaged in branding, marketing, sourcing, manufacturing and distribution of fast moving consumer goods, food and processed food products. It also has agri-sourcing operations in India. Its product portfolio includes product categories, such as basic foods, ready to eat meals, snacks, frozen and processed food products, beverages, personal care and home care under its own portfolio of brands. It has also commenced its operations for marketing and distribution of oats and oats-based cereal products in India through its subsidiary company at Sri Lanka. It offers food and spice products under the brands, Fresh & Pure, Golden Harvest, Sangi's Kitchen and Karmiq; snacks and beverages under Tasty Treat and Sunkist brands; home care products under Clean Mate and Pratha brands, and personal hygiene care products under brands, such as Care Mate, Sach, Swiss Tempelle and Think Skin.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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