FMCG stock to buy now for an upside potential of more than 20%; Do you own it?

The FMCG stock gained momentum after Jefferies projected up to 11 percent revenue growth and 24 percent EBITDA growth for the company between 2025 and 2027. These optimistic forecasts have bolstered investor confidence, leading to a rise in the stock price as the market anticipates strong performance in the coming years.

Price Movement

During Monday’s trading session, shares of Patanjali Foods Limited reached an intra-day high of Rs.1,739.85 per share, rising 0.06 percent from its previous close of Rs.1,718.60 per share. However, the stock retreated later and is currently trading at Rs.1,720.50 apiece. Over the past one year, the stock has delivered 22 percent returns. 

Future Outlook

Jefferies has initiated coverage on Patanjali Foods Ltd. with a ‘buy’ rating, predicting strong growth and margin expansion for the company. The brokerage has set a target price of Rs. 2,050 per share, suggesting a 20 percent potential upside from current market price.

According to Jefferies, Patanjali Foods’ focus on expanding its distribution network, enhancing brand value, and moving towards premium products will drive its double-digit growth.

The company is expected to achieve a 10-11 percent compound annual growth rate (CAGR) in revenue over FY25-27, with a margin improvement of more than 100 basis points, supported by acquisitions in the home and personal care sectors. This growth is expected to result in a 20-24 percent CAGR in EBITDA and earnings per share during the same period.

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Rationale for Growth

Patanjali Foods has successfully diversified beyond edible oils, with its food, home, and personal care segments now accounting for 35 percent of its revenue. These segments contribute to 60 percent of its EBITDA, reflecting their higher margins. While edible oils remain a key part of its business, the sector has low growth, though Patanjali Foods has opportunities to increase its market share as 25 percent of the edible oil market in India is still unorganised.

The company has also expanded its portfolio through both organic growth and acquisitions, with Jefferies forecasting near double-digit revenue growth and a 10 percent EBITDA margin in the medium term. Additionally, Patanjali Foods holds the fourth position in India’s oral care market and aims to scale up its home, skin, and hair care products. Jefferies expects a 15 percent CAGR in the home and personal care category over FY25-27.

Financial Performance

According to its recent financial updates, Patanjali Foods Ltd reported consolidated revenue of Rs.9,103 crores in Q3 FY25, marking a 15 percent increase from Rs.7,911 crores in Q3 FY24. Additionally, the company saw a surge in net profit to Rs.371 crores, rising 71 percent from Rs.217 crores in the same period last year.

Important Accounting Ratios 

The company has a Return on Capital Employed (ROCE) of 12.97 percent and a Return on Equity (ROE) of 9.18 percent. Its Price-to-Earnings (P/E) ratio stands at 54.67, lower than the industry average of 70.04. Furthermore, the company maintains a current ratio of 4.37, a debt-to-equity ratio of 0.01, and an Earnings Per Share (EPS) of Rs.31.74. 

Written by – Siddesh S Raskar

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