 "Patanjali stock hits new high, up 7% on hopes of higher rural demand")
Shares of Patanjali Foods hit a record high of Rs 1,797.95, as they rallied 7 per cent on the BSE in Tuesday’s intra-day trade on hopes of rural demand moving northwards in the coming quarter.
The stock of the edible oil company surpassed its previous high of Rs 1,769.15 touched on July 02, 2024. It has bounced back 54 per cent from its 52-week low of Rs 1,170.10 hit on June 4.
Patanjali Foods is present in edible oils, food & FMCG and wind power generation segments through a bouquet of brands like Patanjali, Ruchi Gold, Mahakosh, Nutrela, etc.
In the June 2024 quarter (Q1FY25), fast-moving consumer goods (FMCG) company, Patanjali Foods, reported a 200 per cent increase in net profit to Rs 262.9 crore, against Rs 87.8 crore in the year ago period. The profitability was driven by reduced volatility in edible oil prices along with stable performance in the food and FMCG portfolio.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin (from operations) were at 6.07 per cent during Q1FY25 as against 5.08 per cent in previous quarter (Q4FY24) and 2.73 per cent in Q1FY24.
However, the company’s net sales fell 7.6 per cent to Rs 7,173 crore in the first quarter from Rs 7,767 in the year ago period. The management continues to see an improvement in sales of branded Edible Oil which constituted around 79.54 per cent of the total edible oil sales for Q1FY25. Premium Oil range under the Nutrela brand continues to grow on a year-on-year basis.
Meanwhile, the board of directors of the company on July 1, 2024 had approved the business acquisition of Patanjali Ayurved Limited (PAL)’s Home and Personal Care (HPC) business accelerating its transition into a leading FMCG company. In FY24, HPC business delivered revenue of Rs 2,771 crore with ~18 per cent EBITDA margin.
This strategic initiative for acquisition of HPC business shall strengthen the company’s FMCG product portfolio with an array of marquee brands and also contribute to the growth in terms of revenue and EBITDA, the company said.
The HPC business of PAL currently has a strong brand equity in India’s FMCG space and enjoys a loyal consumer base across the country. It has 91 products and 186 SKUs catering in four key segments of Dental Care, Skin Care, Home Care and Hair Care. The acquisition will drive key synergies in terms of brand equity and enhancements, product innovations, infrastructure and operational efficiencies. With over 1,600 GCCs currently, India has become a top destination for foreign companies to establish these centres. With a fast-growing economy and relatively cheaper human resource availability, this number is expected to touch 2,400 by 2030, according to EY
If the acquisition closes by mid-August, the overall HPC category may witness an increase in competitive intensity by late September 2024 with the full effect visible from the December 2024 quarter, BOB Capital Markets said in its company update.
Rural is a partial offset to these competitive pressures as recovery is likely this year on favourable monsoons and slower inflation. However, Patanjali Foods expects to achieve its targeted FMCG sales contribution over the next 3-4 years. For this reason, we expect the overall HPC category to have an intensely competitive environment even beyond FY25, the brokerage firm said.