L T Foods — Q3 FY25 earnings call

Call held 28 Jan 2025

Management summary

LT Foods reported a robust Q3 FY25 with consolidated revenue growing 17% and gross profit expanding by 125 bps, driven by increased sales across segments and favorable input prices. However, PAT and EPS saw a slight decline due to increased logistic costs and lower associate earnings. The company is optimistic about margin improvement in FY26, driven by softening freight rates and strategic pricing actions, while continuing to focus on high-growth segments like organic foods and ready-to-eat.

Highlights

  • Consolidated revenue for Q3 FY25 grew 17% YoY to INR 2,288 crores, driven by increased sales from all segments.

  • Gross profit for Q3 FY25 grew 22%, and gross profit margin expanded 125 bps to 33.9% due to favorable input prices.

  • EBITDA for Q3 FY25 increased 7% YoY to INR 263 crores.

  • Debt-to-EBITDA ratio improved to 1.2 in 9 months FY25 from 1.3 in 9 months FY24, indicating balance sheet strength.

  • Organic food segment achieved around 37% growth for the year, with a target EBITDA margin of 14%+.

Concerns

  • PAT for Q3 FY25 decreased by 4.7% to INR 145 crores compared to INR 153 crores in the previous year.

  • EPS for Q3 FY25 decreased by 5% to INR 4.13 versus INR 4.35 in the previous year.

  • India Basmati market share declined to 28% from 30% last year, attributed to vacating non-profitable segments.

  • Associate earnings (Golden Star) declined significantly to INR 4 crores this quarter from INR 11.7 crores last year, primarily due to higher steamer freight costs.

Key financials

2 periods

Headline

  • Revenue
    ₹2,288 Cr
    YoY +17%
  • Gross Profit Margin
    33.9%
  • EBITDA
    ₹263 Cr
    YoY +7%
  • EBITDA Margin
    11.5%
  • PAT
    ₹145 Cr
    YoY -4.7%
  • EPS
    ₹4.13
    YoY -5%
  • Cash Profit
    ₹196 Cr
    YoY +1%

9M

  • Revenue
    ₹6,510 Cr
    YoY +14%
  • EBITDA
    ₹777 Cr
    YoY +7%
  • PAT
    ₹451 Cr
    YoY +1%
  • Debt-to-EBITDA
    1.2
  • ROCE
    19.5%

What they filed

Q1 FY27: revenue up 11.5%, net profit up 89.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,016 1,044 971 1,051 1,017 +0%1,063 +2%910 −6%1,172 +12%
EBITDA53 64 61 55 60 +13%101 +58%75 +23%116 +111%
Net profit61 62 38 37 71 +16%66 +6%69 +82%70 +89%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentIndiaAmericaRest of World
Total Revenue Geographical Mix (Q3 FY25)30%40%12%
Basmati & Specialty Segment Geographical Mix (Q3 FY25)34%39%12%

Capital allocation

high confidence
  • Capex ₹200 Cr
    • US facility completion
    • UK facility completion
    So on the capex side, next year will be almost in the range of INR150 crores to INR200 crores. But as far as this year capex is concerned, our U.K. facility is up, we are doing the sales. On the USA, the facility will be up in the month of May next year.
  • Debt 1.2× EBITDA
    The debt-to-equity ratio maintained at 0.3 and the debt-to-EBITDA ratio at 1.2 in the 9 months financial year '25 compared to 1.3 in 9 months financial year '24.
  • M&A Raghunath Agro Private Limited Acquisition · Pending regulatory

    To make Raghunath Agro a 100% subsidiary and merge it into LT Foods.

    As regarding the Raghunath Agro Industries, Raghunath Agro Industries initially company had 96% holding. So the 4% holding was with one of its subsidiary, Daawat Foods. Now Raghunath now LT Foods is acquiring that 4% share also. Now it will be 100% subsidiary of LT Foods. I hope I have answered your question. And we are in the process of merging this also. So Raghunath Agro will get merged in LT Food.

Guidance & targets

Freight Cost

  • Logistic cost as % of revenue Freight Cost · Next year (FY26) · High confidence 6%

    Previously 7.2% → 6%

    Yes. So the last year, the 5% was the logistic cost. And this year is 7.2%. We are expecting it to come down to 6%.

    — Ashwani Kumar Arora

Overall Growth

  • Overall growth rate Overall Growth · FY26 · High confidence 12-13%
    So we are we will be maintaining that growth rate what we have achieved during this and the overall year growth will be in the range of 12% to 13%.

    — Sachin Gupta

Organic Segment Growth

  • Organic segment revenue growth Organic Segment Growth · Next year (FY26) · High confidence 10% (double-digit)

    From 37% (current year) today

    Yes. Organic this year, we have grown around 37%. But next coming year, we are expecting that the growth will be in the range of 10%, double-digit growth.

    — Ashwani Kumar Arora

Organic Segment Profitability

  • Organic segment EBITDA margin Organic Segment Profitability · High confidence 14%+

    From 11%+ today

    So our target in the organic segment is to have the EBITDA margin in the range of 14% plus. So that's what we are targeting at with the growth in the revenue at 10% to 12% in the revenue growth. So that's our target. And currently, it is we have increased our margin. So it is 11% plus this year.

    — Sachin Gupta

Saudi Arabia Revenue

  • Saudi Arabia revenue Saudi Arabia Revenue · Next 5 years · High confidence SAR 435 million
    Saudi, we will be doing roughly so we have -- for the next 5 years, we have made a plan of doing Saudi SAR 435 million. So we have -- what do you call is setting the whole thing in Saudi Arabia. So next year, we are 20,000 tonnes, we have a plan to do that.

    — Ashwani Kumar Arora

India Ready-to-Eat Profitability

  • India RTE profitability India Ready-to-Eat Profitability · FY27 · High confidence Breakeven

    From Not profitable today

    In year '27, that's what we have mentioned in the presentation.

    — Ashwani Kumar Arora

Overall EBITDA Margin

  • EBITDA Margin Overall EBITDA Margin · FY26 (starting Q2 FY26) · High confidence Improvement
    Yes, for sure. That's what we are expecting that financial year '26 will be better. So it will start reflecting in the quarter 2 of the next financial year.

    — Ashwani Kumar Arora

ROCE

  • ROCE ROCE · High confidence 25%

    From 19.5% (9 months FY25) today

    As given advisory that we are targeting to improve to above 20%. We are already there, but the internal target is to take it to the range of25%.

    — Ashwani Kumar Arora

What to watch in Q4 FY25

Freight cost as % of revenue

Q1 FY26
Current 7.1% (Q3 FY25)
Target Reduction towards 6%

Why it matters

Freight costs significantly impacted Q3 profitability and associate earnings; a reduction is key for margin recovery and overall financial performance.

Yes. So next year, we are expecting the freight rate to come down. So we are in conversation with the freight companies, the ocean freight company. And we are positive that next year in the next quarter, we will not have kind of a positive impact on this. So the freight cost will remain same. But next year, we are seeing it softer.

Risks & concerns

  • Elevated freight costs impacting profitability

    medium

    Freight costs increased logistic cost to 7.1% of revenue in Q3 FY25, impacting associate earnings and overall profitability, though management expects softening in FY26 Q1/Q2.

    Both acknowledged

  • Slow domestic demand in India

    low

    Domestic demand in India for Basmati looks slow, contributing to a 2% market share loss in non-profitable segments, but offset by international growth.

    Management acknowledged

  • Delay in insurance claim profit recognition

    low

    While the money from the insurance claim is expected by March 10th, the profit recognition is pending a High Court verdict, introducing uncertainty on its financial impact.

    Analyst acknowledged

Q&A highlights

5 direct
Impact of higher freight costs on Q3 earnings and future outlook for associate earnings. Direct
So again, the profit has come down because of the higher the steamer freight from Thailand to West Coast. So that's the main impact. So there is no decrease in price or in the raw material cost has not increased. So purely impact of freight cost.

Explains the significant decline in associate earnings (Golden Star) and highlights a key cost pressure impacting overall profitability, with a clear timeline for expected relief in Q1 FY26.

Asked by Jolyon

Decline in India Basmati market share and the underlying reasons. Direct
Yes. Because we have some segment we have left because of the nonprofitability. And but overall, the growth is 8%.

Reveals a strategic decision to sacrifice market share in non-profitable segments, indicating a deliberate focus on margin protection and profitability over volume in certain areas of the domestic market.

Asked by Vipul Kumar

Profitability timeline for the ready-to-eat business in India. Direct
In year '27, that's what we have mentioned in the presentation.

Provides a specific timeline (FY27) for the breakeven of a new strategic growth area in the domestic market, allowing investors to track the progress and investment returns of this segment.

Asked by Prushti Patel

Overall EBITDA margin trajectory and long-term ROCE targets. Direct
No, no. We're very positive that in terms of percentage also, the EBITDA margin should improve. And the focus is on the ROCE. As given advisory that we are targeting to improve to above 20%. We are already there, but the internal target is to take it to the range of25%.

Addresses investor concerns about stagnant margins over the past five years and reiterates the company's commitment to improving profitability and ROCE, providing a clear internal target of 25% for ROCE.

Asked by Arjun Balakrishnan

Status and recording of the pending insurance claim. Partial
The money will be received, but the profit as recording of the profit because still the case is being heard in the High Court. So the money will be received. The recording of the profit because we have taken a hit, that will be recorded once we received the verdict from the High Court.

Clarifies that while the insurance claim amount is expected by March 10th, the recognition of profit from this claim is contingent on a High Court verdict, indicating potential delay in its financial impact.

Asked by Arjun Balakrishnan

Increase in working capital days and inventory build-up. Direct
So yes, the inventory days have moved by 20 days, but the working capital days, we will be maintaining and that inventory, which we are holding, that is basically because of the -- which we are getting the increased demand, expected demand in the -- globally, which we are at.

Explains the increase in inventory days as a strategic move to meet anticipated increased global demand, suggesting management's confidence in future sales and market opportunities.

Asked by Jolyon

3 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

LT Foods reported a strong Q3 FY25 with consolidated revenue growing 17% year-on-year to INR 2,288 crores, driven by increased sales across all segments. Gross profit expanded by 22%, leading to a 125 basis points improvement in gross profit margin to 33.9%. EBITDA also saw a 7% increase to INR 263 crores, with an EBITDA margin of 11.5%. However, PAT for the quarter decreased by 4.7% to INR 145 crores, and EPS fell by 5% to INR 4.13, primarily due to higher logistic costs.

Nine-Month Financial Highlights and Balance Sheet Metrics

For the nine months ended December 31, 2024, consolidated revenue grew 14% to INR 6,510 crores. Gross profit margin expanded by 145 basis points to 33.8%, and EBITDA increased by 7% to INR 777 crores. Despite this, the EBITDA margin for the nine-month period was 11.9%, 80 basis points lower than the previous year. PAT for the nine months was marginally higher by 1% at INR 451 crores, with EPS remaining flat at INR 12.81. The company maintained a healthy balance sheet with a debt-to-equity ratio of 0.3 and a debt-to-EBITDA ratio of 1.2, improving from 1.3 last year.

Impact of Freight Costs and Margin Outlook

Elevated freight costs significantly impacted profitability in Q3 FY25, particularly affecting associate earnings from Golden Star, which declined to INR 4 crores from INR 11.7 crores last year. Logistic costs as a percentage of revenue rose to 7.1% in Q3 FY25. Management expects freight rates to soften, with the full benefit anticipated to reflect in Q1 FY26 for international operations and Q2 FY26 for overall margins, targeting a reduction in logistic cost to 6% of revenue. The company anticipates a 100 basis points margin improvement next year.

Strategic Growth Segments and Geographical Performance

The organic food segment demonstrated strong growth, up 37% for the year, with a target EBITDA margin of 14%+. The company projects double-digit growth of 10% for this segment next year. Geographically, the Middle East was the fastest-growing territory with 37% growth on a nine-month basis, while the US market grew 17%. Domestic demand in India, however, was slower, leading to a 2% market share reduction in non-profitable Basmati segments as the company prioritized margins.

Capex and Expansion Plans

LT Foods incurred INR 164 crores in capex during the first nine months of FY25, against a full-year guidance of INR 200 crores. The US facility is expected to be operational by May 2025, with related capex to be spent in Q4 FY25. For FY26, the company plans capex in the range of INR 150-200 crores. In Saudi Arabia, a five-year plan targets SAR 435 million in revenue, focusing on convenience platforms and packaging facilities in the future.

Raghunath Agro Merger and Insurance Claim Update

The company is in the process of acquiring the remaining 4% stake in Raghunath Agro Private Limited from its subsidiary, Daawat Foods, to make it a 100% subsidiary, followed by a merger into LT Foods. Regarding a pending insurance claim, the Supreme Court's final verdict is expected by March 10th, 2025, with the company anticipating receipt of funds. However, the recording of the profit from this claim is contingent upon a High Court verdict.

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