- 27 Jan 2023
- ICICIdirect Research
Patanjali Foods witnesses 26.2% sales growth on consolidation of acquired FMCG business
News: Patanjali Foods witnessed 26.2% sales growth mainly on account of consolidation of acquired FMCG business. Oil & Vanaspati segment sales grew by 8.9% whereas seed extraction segment sales declined by 29.7%. Other FMCG business grew by 3.6x mainly due to acquired fmcg business. Gross margins contracted by 84 bps however improved sequentially by 370 bps. Overhead spends increased by 106 bps, which resulted in operating margin contraction of 205 bps. Operating margin improved sequentially 230 bps. Net profit grew by 15% to Rs 269.2 crore mainly on account of reduction in interest cost after repayment of debt.
Views: We believe Patanjali foods is likely to witness improvement in gross margin mainly on account of reduction in palm oil prices. Moreover, foods business is growing at faster pace, which is also likely to improve margins going forward given FMCG business commands margin upwards of 15% compared to commodity edible oil business of 4-5%. We remain positive on Patanjali foods given margin expansion possibility.
Impact: Positive