Breath to your Investment

Tarun Aggarwals Sanjivani Stock

E-Mail id- sanjivanistock@gmail.com June 27, 2011 CMP-Rs.64/Target Price Rs.100/Research report on ADF Foods Ltd. (BSE code-519183 & NSE code -ADFFOODS)

An 21 year old entity that will now move to its name and motto of wealth creation
We all have seen some time back, our Grandmother & even mother also used to make food at home and feel happier. At that time no one was even think that we will buy ready to eat foods, vegetables, pickles, papad and juices from outside. The trend change because of nuclear families where husband and wife both are working and they dont have time to cook at home. The market for eatable items and juices in India alone can witness substantial growth for ADFand can expand significantly in the years ahead. Modern Retail format in India and Retail Growth in semi urban and rural India are a few factors which present opportunities for the company.

Background & Business details of the company:

What started as a humble venture back in 1932 of a small retail store selling Dry Fruits & Nuts, soon diversified into a Major Food Processing Company manufacturing Ethnic Indian pickles, chutneys, canned foods frozen foods and

spices under various Brand Names which are today leaders in their segments and categories. ADF (American Dry Fruits) was incorporate in 1990 is today Indias leading integrated ready to eat food and Frozen Food Company. ADF is promoted by Hariram Mewawala, Ramesh Thakkar and Kishore Thakkar. The company operates in manufacturing and processing a wide range of canned, bottled and processed vegetables fruits and foods for the export and domestic markets. ADF markets its product under various brand names across the globe. The exports are a major contributor to its top-line.

Infrastructure The manufacturing plants are located in Nadiad (Gujarat) and

Nashik (Maharashtra). The production capacity at Nadiad plant is 10,450 metric ton (MT) and Nashik plant is 11,000 MT. ADF has 3 subsidiaries i.e. ADF Foods UK Ltd (ADF UK), ADF Foods (Mauritius) Limited (ADF M) and 'Power Brands (Foods) Pvt. Ltd. (PBFPL) as on FY10. In Nasik factory, total built up area is 10000 Sq Mt while in Nadiad factory, total built-up area is 15000 Sq Mt & USA factory, total built-up area is 3000 Sq Mt. Product manufactured in these factories pickles, chutneys, ready to eat curries, frozen parathas, snacks, vegetables & canned curries. All technology sourced from Buhler, Germany. Totally automated spice processing units. Distribution Network The Company is a significant emerging player in the processed food industry. It is engaged in the manufacturing and export of various Indian Processed foods. The range of Companys products includes Pickles, Pastes, Chutney, Ready-to-eat Vegetables, Canned Vegetable in Brine, Frozen Foods, Spices in whole and ground form, IQF Indian Vegetables, Frozen Parathas, etc. The Company is tapping new markets and constantly innovating and renovating the products in its portfolio to meet the changing tastes and preferences of the Global Consumer. The Company has established brands and strong distribution networks in Europe, US, Middle East Countries, Australia, Canada and Asia, which would ensure immediate distribution of the new variants.

Brand Names and brand Building:

Ashoka Brand - Ashoka is the companys oldest and Flagship Brand. The most famous Indian brand in the world. Its range includes ready-to-eat curries (Heat & Eat), Frozen Foods (Indian Breads & Snacks), pickles, condiment pastes, mango pulp/slices, chutneys, IQF (Individually Quick Frozen) ready-to-cook vegetables, and Microwaveable rice Camel Brand - In the late sixties, ADF acquired a premium Middle Eastern Pickle brand called Camel to diversify into the processed foods business. This acquisition was a launch platform for our company into the Food Processing Industry and International business. Aero plane Brand After years of the Camel Brand acquisition company launched an economy brand of Indian pickles in the Middle East under the name, Aeroplane. Aeroplane Pickles has since been a leader in the economy segment. In the food services category, Aeroplane is the leading Mango Chutney brand in the UK and the USA. Truly Indian Brand - This Authentic range of products has been created in India to suit the taste palate of our Mainstream customers (Non Indian customers). Delicate, aromatic spices, make Truly Indian a very premium offering in the Mainstream Stores. Each product offers a true taste of Indian cuisine at its very best. Khan Saama Brand This Authentic Mughlai Frozen Foods, to cater to South Asians is brought to you in a range that includes pooris, rumali rotis and parathas made the traditional way. ADF Soul Brand - The name, Soul, seems like its made for a food brand. Add to that the fact that all our food products will have a touch of health. When our products beautifully marry flavour and goodness, so should the name. Soul, while subtly cueing soul food, also seems like it would belong to a brand of substance. Two another brands are PJs and Nates are also very popular in USA.

Industry Prospects:India is one of the worlds major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both

investors and exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US $438 billion. The Indian food industries sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000. The industry has the highest number of plants approved by the US Food and Drug Administration (FDA) outside the USA. India's food processing sector covers fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc. We cover an exhaustive database of an array of suppliers, manufacturers, exporters and importers widely dealing in sectors like the -Food Industry, Dairy processing, Indian beverage industry etc. We also cover sectors like dairy plants, canning, bottling plants, packaging industries, process machinery etc.

Key management personnel:

Mr. Ramesh H. Thakkar - Chairman Mr. Ashok Thakkar - Vice Chairman Mr. Bimal Thakkar - Managing Director Mr. Bhavesh R. Thakkar - Executive Director

Financials : As per the financials of ADF Foods at Market cap of 120 Cr. With sales revenue of Rs.111 Cr i.e. we are getting the whole company at 1.08 times of the sales revenue of the company. EPS of the company comes Rs. 8.90/- The book value of ADF Foods is Rs. 60.50 i.e. Stock is available price to book value only at 1 times. The company has lot of potential to go up and the investment will just as risk free investment. Here below one can see Qtrly trends of the company:Quarter On Quarter(Standalone)
Particulars
Net Sales & Other Operating Income

201103
30.99

201012
28.53

201009
29.30

201006
21.98

201003
28.16

200912
23.32

200909
27.37

Total Expenditure PBIDT (Excl OI) Other Income Operating Profit INTEREST Exceptional Items PBDT DEPRECIATION PBT TAX Profit After Tax Net Profit (After Extrodinary items) Closing Price Calculated EPS Unit Curr Calculated EPS Annualised Unit Curr PE PBIDTM% (Excl OI) PBIDTM% PBDTM% PBTM% PATM%

25.10 5.89 1.23 7.12 0.47 0.22 6.87 1.15 5.73 0.29 5.44 5.46 58.50 2.67 10.68 5.48 19.02 22.97 22.17 18.47 17.55

22.88 5.65 0.67 6.32 0.45 0.03 5.90 1.14 4.76 0.47 4.28 4.25 68.10 2.10 8.41 8.10 19.81 22.15 20.67 16.67 15.02

22.69 6.61 1.22 7.83 0.33 0.00 7.50 1.12 6.38 0.86 5.52 5.52 87.20 2.71 10.84 8.05 22.56 26.74 25.60 21.79 18.84

18.33 3.65 2.18 5.83 0.38 -1.21 4.24 1.10 3.14 0.58 2.56 2.56 81.30 1.26 5.03 16.15 16.61 21.01 19.29 14.30 11.66

26.04 2.12 2.75 4.87 0.47 0.00 4.40 1.20 3.20 0.51 2.69 2.68 93.35 1.32 5.29 17.65 7.52 17.28 15.63 11.37 9.57

19.67 3.66 0.64 4.29 0.45 0.79 4.63 1.00 3.62 0.41 3.22 3.07 68.65 1.58 6.32 10.86 15.67 18.41 19.83 15.53 13.80

20.75 6.63 0.49 7.12 0.47 0.38 7.03 1.00 6.03 1.46 4.57 4.56 73.65 2.42 9.69 7.60 24.21 26.00 25.67 22.04 16.71

Peer Group Comparison Company Name ADF Foods Nestle Glaxo.Cons. Health Britannia Inds Jubilant FoodWorks Ruchi Soya Inds. Kwality Dairy Rei Agro Zydus Wellness Ltd Year End 201103 201012 201012 201003 201003 201003 201003 201003 201103 Net Sales 112 6255 2306 3401 476 13514 1054 3693 336 PBIDT 26.14 1273.94 494.12 219.40 66.54 550.06 52.25 612.60 91.61 PAT 17.81 818.66 299.85 116.51 32.97 172.47 17.95 157.17 59.48 EPS 8.90 84.91 71.30 9.75 5.18 6.54 0.58 3.22 PE 6.57 44.70 32.44 32.80 60.53 14.88 139.80 9.99 Mkt Cap 117.00 36591.69 9725.75 3821.24 1995.49 2560.54 2508.87 1569.50 PBIDTM% 23.38 19.98 20.33 6.41 13.99 4.07 4.96 16.59 PATM% 15.93 12.84 12.34 3.40 6.93 1.27 1.70 4.26 ROCE% 18.29 159.56 48.73 15.64 36.31 12.64 25.91 13.20 ROE% 15.64 113.97 32.15 19.51 47.04 11.49 45.12 22.08

Comparision Company Vs Industry:

ADF Foods Ltd. Company V/s Industry- [INR-Crore] MarMar- % to Ind Description 11 11 Agg Mar10 % to Ind Agg Mar09

Mar-10

Mar-09

% to Ind Agg

No of Companies Financials Net Sales Total Income Total Expenditure PBIDT PBIT PBT PAT Cash Profit Total Debt Gross Block Net Current Assets Total Assets Margin Ratios Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) Total Debt/Equity(%) Current Ratio(x) Quick Ratio(x) Interest Cover(x) 19.52 19.36 17.90 15.93 0.06 9.50 7.56 13.27 111.77 116.09 89.95 26.14 21.64 20.01 17.81 22.31 7.07 75.67 49.83 128.43

3.00 901.82 914.03 781.81 132.22 121.67 116.64 81.79 92.34 32.32 207.79 122.10 328.92 12.39 12.70 11.51 19.77 17.78 17.15 21.77 24.16 21.87 36.42 40.81 39.04 102.89 109.44 83.82 25.62 21.43 19.62 15.65 19.84 1.15 68.79 49.00 108.21

204.00 90536.78 91623.23 84595.88 7027.35 5637.35 4086.72 2904.41 4157.34 22008.01 23233.22 21439.97 41365.27 0.11 0.12 0.10 0.36 0.38 0.48 0.54 0.48 0.01 0.30 0.23 0.26 95.75 99.57 80.22 19.35 15.42 13.22 10.20 14.13 1.58 61.77 30.54 89.08

309.00 110819.68 112346.93 104329.88 8017.06 6228.94 3915.83 2606.98 4290.74 24278.12 27489.02 21567.06 44044.72 0.09 0.09 0.08 0.24 0.25 0.34 0.39 0.33 0.01 0.22 0.14 0.20

13.30 13.49 12.93 9.07 0.12 5.54 4.54 24.20

2.90 2.40 2.22 1.97

18.53 20.83 19.07 15.21 0.01 7.61 6.56 11.84

6.52 6.15 4.46 3.15 0.41 2.74 1.59 3.64

0.03 0.02 0.02 0.02

16.20 16.08 13.79 10.64 0.02 4.43 3.16 7.01

5.81 5.58 3.51 2.34 1.32 2.57 1.37 2.69

0.02 0.01 0.01 0.01

Latest Developments & Conclusion:

Acquisition of Elenas Foods-a US based manufacturer and marketer of organic and natural Mexican food product. Additional of Elenas popular brands like PJs Organic and Nate are to our existing portfolio. Our range of ready-to-eat curries under the Ashoka brand is now launched with new recipes in new packs. Expansion in new markets France-Sweden.

 Addition of new client for contract manufacturing in the US and Sweden. Increasing the distribution network for ADF SOUL in select retail outlets in Mumbai and Pune. Introduction Of in house cold storage unit (750 MT approx), leading to an expansion of the frozen unit capacity at our Nadiad facility. This would result in efficient management of cold chain.

We believe that there could be interest of ready to eat food items of the world to take strategic stakes in the likes of ADF Foods Ltd. primarily because of the fact that this provides them an immediate large footprint in one of the largest and fastest growing markets in the world. In the event of the company being able to improve its Operating Margins or in the event of the promoters deciding to sell stake, the upside from the current levels could be substantial. The downside looks restricted from the current levels.

Long Term investors can accumulate the stock.

The author invites readers to send him feedback, Queries and welcome comments @ sanjivanistock@gmail.com to Mr.Tarun Aggarwal

Disclaimer: This document is for private circulation only neither the information nor any opinion expressed constitutes an offer, or any invitation to make an offer, to buy or sell any securities. We does not accept any liability what so ever direct or indirect, that may arise from the use of information herein.