By: JS Global Capital Limited
We tweak down our 2015E earnings estimates for Engro Foods Limited (EFOODS) by 3% post 1H2015 earnings of Rs2.58/share (+498% YoY) with no material changes going forward.
Our Target Price remains unchanged at Rs191 with a ‘Buy’ rating on the stock.
EFOODS posted its highest profitability in 1H2015 led by growth in dairy’s sales volumes; however earnings clocked in below our expectation on lower-than-expected gross margins.
EFOODS 2015E earnings are still expected to expand by 303% YoY to Rs4.68/share, while we estimate earnings to grow at a 5-year (2014-19F) CAGR of 58% and at a 3-year (2014-17F) CAGR of 87%.
We flag lack of diversity in product portfolio, however potential launch of milk powder product next year is likely to somewhat address this issue.