Can Patanjali achieve its 5-year target?

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Who doesn’t know about Patanjali, the producer of oils to toothpaste. Through Patanjali Foods, the group also has a presence in the stock market. This allows the retail investors to become part of this conglomerate. Patanjali Foods is part of Patanjali group and it has various business segments. The company has 43 manufacturing units across the country. It has 25 processing plants out of which 19 are operating.

Patanjali Foods was previously known as Ruchi Soya Industries.

Patanjali Group acquired this company for Rs 4,350 crore in September 2019 under the bankruptcy process. In May 2021, it purchased Patanjali’s biscuit, cookies, and rusk business for Rs 60 crore, thereby entering the food business. In April 2022, the name of Ruchi Soya was changed to Patanjali Foods. Currently, the promoters hold a stake of 80.82%, but they will need to sell approximately 6% of their shares to comply with SEBI’s minimum public shareholding regulations.

Food business Company has 8 categories under it, which incorporates 242 products including chawanprash, honey etc.

Second category is nutraceuticals & Wellness Products, the company has products in the categories of General Nutrition – multivitamins and weight management. Under Sports Nutrition, the company offers energy supplements and mass/muscle gainers. In Medical Nutrition, the company has products such as diabetic nutrition, dialysis nutrition, bone health, anemics, and more.

Plantations Oil Palm Plantation, the company has an allocated area of 6.23 lakh hectares, out of which farming is being conducted on 62,102 hectares. The company is working with 44,026 farmer families across 11 states.

Edible oil Patanjali Foods is one of the leading edible oil companies in the country. It has brands such as Ruchi Gold, Mahakosh, Nutrela, Sunrich, and Ruchi Star under its portfolio.

The company also has businesses in Oleochemicals and Windpower. It has a total production capacity of 84.6 megawatts (MW) across 6 states.

The company has a strong distribution network with 4,763 distributors across the country. It has a presence in 457,788 retail outlets nationwide. As of December 2020, the company’s products were being exported to 31 countries. Following the COVID-19 pandemic, there has been an increased focus on healthcare products. With an increased focus on organized sectors and nationalism, it is expected that the sales of the company’s products will increase. Vertical integration will enhance technical knowledge, enabling the benefits of one segment to be shared with other segments.

Management appears to exhibit discipline due to efficiency, reduced debt, and the collective functioning of all segments. The company has decentralized its decision-making process, which helps in making quick decisions. It maintains strong relationships with its customers, employees, small suppliers, and vendors.

Financial Performance

The Company’s financial performance is also good. Its profit is continuously increasing. In FY22 company’s profit was Rs 806 crore, which increased 9% in FY23 to reach Rs 886 crore.

Recently Patanjali has been in the news. It has given a vision document for next 5 years. In which company has presented an aggressive strategy for the next 5 years. The company aims a revenue target of Rs 50,000 crore and operating profit of Rs 5,000 crore. In FY23, the company’s operating profit came at Rs 1,577 crore.

Growth triggers Now let us look at growth triggers of the company The Company has strong presence in edible oil with brands like Ruchi Gold, Mahakosh and Sunrich which will help in gaining market share from unbranded players as customer will move towards branded items. Backward integration will reduce the volatility in raw material prices.

Presence across the value chain will help in better tracking of the whole supply chain. Helping farmers through the palm plantation program will lead to better relations. and work towards reducing palm oil imports will improve relations with all stakeholders.

Valuation Now let us look at valuations of the company. Its PE ratio as per for FY24 earnings is 23.6 and for FY25 earnings it is 20.4. The Company’s shares are trading 27% below its 52 week high. Its current market price is around Rs 1100 per share. Most of the brokers have given buy ratings on the stock. ICICI Direct has given target price of Rs 1,750 and Antique Rs 1,725.

So figures suggest that Patanjali is fundamentally a good company. Experts feel that investing in its shares will give you good returns. But keep in mind nothing is guaranteed in the share market. Experts generally recommend that if a company’s fundamentals are strong, its financial performance is encouraging and valuations are attractive, then you can bet on it.