Experienced Management: Company is managed by seasoned professionals. Mr. Ajit Thomas, Executive Chairman of the company has about three decades of experience in business and management with AVT Group of Companies.
Strong Brand Presence: AVTCL leads the branded tea market in Kerala with a 45-50% share and ranks second in Tamil Nadu with 25%, just behind Hindustan Unilever Ltd. It maintains a strong market position despite tough competition.
Lower Revenue Growth: Despite having a strong brand presence, company’s 5 years revenue growth has been 4.6% which is lower than industry average of 10.1%.
Investment Thesis: The stock is currently trading at a P/E ratio of 19.3x with a price of Rs. 20,900 per share, suggesting potential overvaluation compared to the industry median P/E of 15.8x. Relative valuation indicates a price of Rs. 17,417 per share, while the intrinsic value through DCF is Rs. 23,038 per share.
Despite slower revenue growth, we recommend a Buy due to the company’s strong presence in the Southern tea market. The company has a solid balance sheet with total assets of Rs. 389 crore and robust liquidity, indicated by a current ratio of 4.9x. With the rising demand for tea and expansion opportunities across India, we believe the company has significant growth potential. Our target price per share is Rs. 23,000.
Please note that the company has made a buyback of 11,048 shares for Rs. 13,000/share.
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