We recommend ‘BUY’ on DFM FOODS LIMITED for a target of INR 315 – valuing the company at P/E 39x of FY21E Earning.

CMP:                  INR 248

Target Price:     INR 315

Investment Rationale:

  • DFM markets its products under the brand name “CRAX” and “NATKHAT” which has got strong recognition in the snacks category in the country.
  • Robust Marketing and Distribution Network
  • Limited project execution risk, commissioning of Line up-gradation at Ghaziabad Unit
  • Experienced Promoters capable of managing the business growth
  • High growth potential with solid track record and pays a dividend

Valuations And View:

DFM Foods is an attractive stock for growth-seeking investors, with an expected double digit earnings growth in the upcoming year which is expected to flow into an impressive return on equity of 26% over the next couple of years. The stock price is available at a discount value compared to industry average. We value the business at 39x FY21E EPS and recommend a BUY rating on the stock with a target price of INR 315 per share.

Risk & Concerns

  • Geographical concentration, however diversifying in other regions: DFM earns majority of its revenue from CRAX corn rings which contributes around 80-85% of its total income. Though, the company has geographical concentration, CRAX has been in existence for more than three decades and has developed acceptance among customers especially with the 6-10 years age group. Furthermore, DFM revenue is concentrated in the Northern region of the country from where it derives around 75%-80% of its revenue. However, the company has been improving its distribution network in other parts of the country and has witnessed growth in revenue from other regions as well.
  • High Competition from other players: The company remains exposed to stiff competition from larger established companies and small regional players which have mushroomed across the country and has added to competitive intensity of the industry. Hence, the biggest challenge for the industry players would be scaling up their regional presence to a national level while maintaining highest quality standards. However, an established brand name enables DFM to have an edge over its competition.

Company Background

DFM Foods Limited (DFMFL) was established in 1983 as part of diversification process of Delhi Flour Mills Company
Limited. The company is engaged in the business of manufacturing, selling, and marketing of packaged foods. DFMFL’s products profile consists of 13 distinct product variants. The company markets Corn Rings and Wheat Puffs under the ‘CRAX’ and ‘NATKHAT’ brand names. In FY18, DFMFL derived approximately 61% of its revenue from the Corn Rings and 27% of its revenue from Curls. The company had an installed capacity of 35,300 Metric Tonne (MT) per annum as on March 31, 2018. The company also undertook line up-gradation of additional 3800 MTPA with a total cost of Rs. 15 crore to be funded through debt of Rs. 14.10 core and internal accruals of Rs. 0.9 crore. The project has become operational in September, 2018 increasing the total installed capacity to 39100 Metric Tonne (MT) per annum.


  • Manufacturing, selling, and marketing of packaged foods
  • The company markets Corn Rings and Wheat Puffs under the ‘CRAX’ and ‘NATKHAT’ brand names.



  • Packaged Foods

Industry Overview

The organized snack food industry consists of four segments – traditional namkeens, potato chips, bridged and extruded snacks. Collectively the industry is estimated to be about H 23,000 crores per annum and from all counts is growing at a healthy clip.
The organized sector consists of several kinds of players. These competitors range from having a product portfolio covering all segments of the market and a national presence, to the majority who are concentrated in one segment and have a strong regional presence.
Besides the organized sector, a large unorganized sector also exists. The unorganized sector is very localized and normally operates in a single segment. The growth of the Industry has continuously attracted new entrants in both the organized and unorganized sector in virtually all the segments of the market.

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