Mishtann Foods: The Undervalued Micro-Cap with Big Potential ??

 Mishtann Foods Limited

Mishtann food is a low valuation stock but as this is a micro-cap stock it has its own inherited risk. here are the key fundamental insights:

Positive Indicators:

1. Stock PE (2.12) is lower than Historical PE (93.1) and industry PE (36.4)

2.      Book Value (₹ 7.38) of this stock is higher than CMP (₹ 7.13) on 6^th Jan 2025.

3.      Earnings indicators also look healthy at ROE (98.7 %) & ROCE (88.7 %)

 

4. Revenue and Profit Growth:
• Total Revenue (Consolidated): ₹12,881.42 crore
• Net Profit (Consolidated): ₹3,460.29 crore
• EBITDA: ₹359.12 crore
  This reflects robust growth and profitability, indicating strong financial performance.
5. Operational Efficiency:
• The company has a state-of-the-art processing plant with a capacity of 45 metric tonnes per hour. This integrated facility enables cost reduction and faster processing.
• Cash and Carry Model: The company sources grains through direct cash transactions, ensuring better control over procurement costs.
6. Market Expansion and Branding:
• Presence in 15+ states in India with strong ties to over 100,000 retailers and super stockists.
• Significant brand-building initiatives, including participation in GulFood (a global trade fair), and aggressive social media engagement.
7. Diversification and Product Expansion:
• Expansion beyond rice into salt and other agro products, aiming to cater to diverse market segments.
• Future plans to diversify into new food products, leveraging the brand’s recognition.
8. Low Debt Levels and Foreign Investment:
• Debt is minimal, reducing financial risk.
• The company has foreign investment (5.02%) from reputed institutions like Nomura Singapore Limited ODI and Zinnia Global Fund.

---

Concerns/Risks:

1. It has all the risk of being micro-cap stocks.
2. Promotors have reduced their shares in the last quarter to raise funds.
3. Dividend Yield:
• The company declared a dividend of ₹0.001 per share (0.1%). This is quite low and may not appeal to income-focused investors.
4. Promoter Share Dilution:
• As part of preferential allotment, promoters sold shares, which could indicate reduced promoter confidence or an attempt to bring in strategic investors and this will dilute the ownership.
5. Competition and Market Saturation:
• The FMCG segment is highly competitive. The company's ability to maintain margins in the face of increasing competition will be crucial.

---

Overall Fundamental Assessment:

• Strengths: Strong revenue growth, operational efficiency, and market presence.
• Weaknesses: Low dividend payout and potential dilution of promoter shareholding.
• Opportunities: Expansion into new product categories and global markets.
• Threats: Market competition and potential pressure on profit margins.

Conclusion:

Mishtann Foods Limited is fundamentally strong and has significant growth potential. However, investors should keep an eye on promoter activity, competition, and the company's ability to sustain growth. If the goal is long-term capital appreciation rather than dividend income, the company could be a good investment option.