Vidhi Spe­cialty Food In­gre­di­ents Ltd: In­ter­est­ing in­gre­di­ent!

(BSE Code: 531717) (CMP: Rs.73.90) (FV: Re.1)

Money Times - - Stock Buzz - By Subra­ma­nian Ma­hade­van

In­cor­po­rated in 1994 as Vidhi Dyestuffs Man­u­fac­tur­ing Ltd, Mum­bai-based Vidhi Spe­cialty Food In­gre­di­ents Ltd (VSFIL) is a man­u­fac­turer, whole­saler and ex­porter of Ba­sic Food Color, Food In­gre­di­ents, Lake Food Color and D&C Food Color. It is a key global man­u­fac­turer of food col­ors with an in­stalled ca­pac­ity of 4,200 TPA. Ex­ports con­sti­tute 53% of sales. Food color finds ap­pli­ca­tion in cat­e­gories like con­fec­tionery, bak­ery prod­ucts, desserts, dairy prod­ucts, sea­son­ings, bev­er­ages, pet foods, etc. Its prod­ucts are de­vel­oped us­ing premium grade in­puts and so­phis­ti­cated tools and are made in com­pli­ance with the in­dus­try stan­dards.

Around 55% of the ~$2.4 bil­lion global food and bev­er­ages color mar­ket is con­sti­tuted by nat­u­ral food col­ors and the rest by syn­thetic. It is a small seg­ment com­pared to the ~$35-40 bil­lion global dyes and pig­ment mar­ket and is yet un­der­pinned by sec­u­lar growth trends. Mar­ket re­searchers fore­cast ~7-8% CAGR growth in the next seven years driven by reg­u­la­tory re­quire­ments, ur­ban­iza­tion and struc­tural de­mand sce­nario for the food and bev­er­age in­dus­try. Given the ro­bust de­mand, VSFIL aims to dou­ble its ca­pac­ity to 8,400 TPA by 2020 to cap­ture a mar­ket share of ~20%. Given the high pro­moter hold­ing, com­fort­able D/E ra­tio, steady busi­ness with dou­ble-digit mar­gins and ris­ing de­mand, we rec­om­mend this stock on every de­cline for up to 50% re­turns within two years.

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