Top 5 Edible Oil Stocks to Consider Right Now
India is the biggest importer of palm oil. Thus, the Indian edible oil industry stands to benefit from this situation.
With the ban on palm oil exports, the prices of all edible oils such as sunflower oil, mustard oil and soybean oil could increase. This will increase the margins of unsold stocks left to Indian edible oil companies.
Here’s a list of the top edible oil stocks that are most likely to gain under the current circumstances.
Marico, one of the nation’s leading consumer goods companies, is first on our list.
The company has a diverse product portfolio that includes coconut oils, hair oils, edible oils, hair care and men’s grooming products.
It derives almost 66% of its turnover from the edible oils segment. In the super premium refined oils segment, Marico’s Saffola edible oil brand has an 83% market share.
Its edible oil franchise has steadily grown in value and volume over the past several years. This is mainly due to changing customer preferences towards healthy cooking and increased in-house consumption during the pandemic.
Over the past three years, Marico’s revenue has grown at a compound annual growth rate (CAGR) of 3.1%, driven by growth in its edible oils business. Net profit also increased at a CAGR of 2%.
In recent quarterly results, its revenue grew 13% year-over-year (YoY). Net income increased only slightly by 1% due to inflationary pressures.
The company is focused on expanding its edible oils business into new markets by leveraging its successful Saffolalife campaign and also increasing its penetration in existing markets.
#2 Soy Ruchi
Next on our list is Ruchi Soya, an integrated player in the edible oil business.
The company is one of the leading manufacturers and distributors of edible oils in the country, with a presence across the entire value chain.
It is also the largest palm oil plantation company in India.
Ruchi Soya has twenty-two manufacturing plants in India with a refining and seed crushing capacity of 11,000 tons per day and a packing capacity of 10,000 tons per day.
The company has a diversified portfolio with brands such as Ruchi Gold, Nutrela, Sunrich and Mahakosh.
Over the past three years, its revenue has grown at a CAGR of 8.4%, driven by high volumes driven by new product launches.
In recent quarterly results, the company’s revenue jumped 40.8% year-on-year while net profit edged up 2.9% year-on-year.
#3 Agro-tech foods
Third on our list is Agro Tech Foods, an established player in the edible oils and branded foods sector.
The Company has a diverse product portfolio consisting of edible oils, ready-to-cook snacks, ready-to-eat snacks, spreads and dips.
It sells its products under the Sundrop and Act-II brands.
Agro Tech Foods derives nearly 60% of its revenue from edible oils. It holds a 13.8% market share in the refined edible oils segment.
The Company’s Sundrop edible oil brand enjoys good brand recall and is an established brand in the edible oil segment.
Over the past three years, Agro Tech Food’s revenue grew at a CAGR of 2.7% while net profit fell at a CAGR of 3%, primarily due to high input costs.
In recent quarterly results, the company’s revenue was flat. However, net profit fell 17.3% year-on-year
#4 Gokul Agro Resources
Next on our list is Gokul Agro-Resources, one of the leading edible oil processors and manufacturers.
The Company is mainly involved in the manufacture of edible oils, inedible oils and related products.
It also produces grains, spices, oilseeds and animal feeds, and other flours.
Gokul Agro brands include Vitalife, Makeh, Zaika, Pride and Puffpride.
The company has a seed processing capacity of 3,200 tons per day and an oil refining capacity of 3,400 tons per day.
In addition to that, it also has a cake mining capacity of 1,000 tons per day and a vanaspati manufacturing capacity of 200 tons per day.
Gokul Agro also has an extensive distribution network that reaches customers in 20 states. It also exports its products to several countries, including the United States, China, South Korea and the European Union.
Over the past three years, the company’s revenue has grown at a CAGR of 22.6% due to the increase in the scale of operations. Net profit increased at a CAGR of 60.1% due to lower financial costs.
In the latest quarterly results, its turnover increased by 12.8%. Net profit also jumped 106.4% year-on-year.
The company plans to focus on reducing costs, improving product quality and expanding into new markets.
#5 Adani Wilmar
Last on our list is Adani Wilmar, a joint venture between the Adani Group and the Wilmar Group.
The company is a leading consumer goods company that offers kitchen essentials such as edible oil, wheat flour, rice, pulses and sugar.
It derives 65% of its revenue from the edible oil business and sells its oil under the Fortune brand. The company has an 18% market share in the edible oil segment.
Some of its other brands include King’s, Jubilee, Alpha, Aadhar, Raag, Bullet and Avsar.
Adani Wilmar has twenty-two manufacturing plants in India consisting of 10 crushing units and 19 refining units with a capacity of 8,525 metric tons per day and 16,285 metric tons per day, respectively.
It also has an extensive distribution network of 5,590 distributors and 16 lakh outlets in 28 states and eight union territories.
The company also exports to over 50 countries and is India’s largest castor oil exporter.
Over the past three years, Adani Wilmar’s revenue has grown at a CAGR of 8.8% due to growth in the edible oils sector. Net profit also increased by 21.3% due to lower financial charges.
In recent quarterly results, the company’s revenue rose 41% year-on-year and net profit jumped 66%.
Going forward, the company plans to increase its market share by entering South and West India.
Should we bet on stocks of edible oils?
With rising oil prices, edible oil companies stand to benefit.
Additionally, the government has announced the National Mission on Edible Palm Oil (NMEO-OP) to increase palm oil production in India and reduce reliance on imports.
This opens an opportunity for existing edible oil players in the country to develop their oilseed crushing and refining capabilities.
Therefore, stocks of edible oils could be a good bet in the medium to long term.
However, before investing in any of the stocks, it is important to check the fundamentals and valuations of each of these stocks.
Remember that it is essential to exercise caution before investing in the market.
Disclaimer: This article is provided for informational purposes only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com