Saral Gyan Hidden Gem - Dec 2012

UNEXPLORED MULTIBAGGER SMALL CAP STOCKS
EQUITY RESEARCH REPORT
BAMBINO AGRO INDUSTRIES LTD. BSE CODE: 519295
Industry: Consumer Food CMP: Rs. 55.65 (25/12/2012)
Market Cap: 44.57 (INR in Millions) Target Price: Rs. 120.00
Date: December 25, 2012 Time Period: 18 – 24 months
Saral Gyan Capital Services
www.saralgyan.in
An Independent Equity Research Firm

HIDDEN GEMS – DECEMBER 2012
- 2 - SARAL GYAN CAPITAL SERVICES
TABLE OF CONTENT
S.No Content Page No.
1. Company Background 03
2. Recent Developments 09
3. Financial Performance 10
4. Charts & Graphs 12
5. Peer Group Comparison 14
6. Key Concerns / Risks 14
7. Saral Gyan Recommendation 15
8. Disclaimer 17

1. Company Background
Bambino Agro Industries Limited (BAIL), incorporated in 1982, is one of the largest
vermicelli producers in South East Asia which is made out of Duram wheat semolina
(suzi/rawa). It is part of the diversified Bambino Group having interests in FMCG
Products. After introducing vermicelli products in 1982 in South India, Bambino later
made its pan India's presence in a very short time.
Today, Bambino is a household name, and the word has become generic to Vermicelli,
which is a part of the daily diet of millions in India. Bambino not only pioneered and
introduced vermicelli in India, but has become the market leader and has become a
barometer of success story.
India continues to be a high growth economy and a significant portion of this growth
comes from FMCG sector particularly consumer product companies. Earlier, the
consumption of pasta products was confined to urban population but now slowly with
the rising literacy and income levels of rural population; the market for pasta products
has expanded to smaller towns. Bambino has intensified product promotion activities by
highlighting nutritional values of pasta products.
The awareness amongst the consumers for leading a healthy life also has led to the
growth of this food sector. To leverage this, Bambino had introduced an innovative
range of products and is continuously adding value-added products to the existing
product line. Every product from Bambino is a testimonial of the uncompromising
quality standards. These specialties enabled Bambino to emerge a household name in
India and globally.
Company’s manufacturing units are strategically situated in four different geographical
locations with ultra modern facilities and equipped with sophisticated machinery for self
sufficiency in manufacturing and to cater to the ever-growing domestic and overseas
needs. The company has contract farming to ensure consistency of agri-products and
control on the entire value chain. In addition to that, an able, technical team of
procurement personnel takes care of what is sourced for produce. The entire
manufacturing is documented to the minutest detail ensuring international quality
standards
Bambino has one of the largest distribution networks in the country. It caters to all the
consumers' needs from Kashmir to Kanyakumari. The company serves to the stockists
through its own depots / carrying and forwarding agents; stockists to retail & wholesale
trade—by which the consumers gets the final product. The key to success of distribution

network is company’s associates, who are highly committed and loyal to the company.
Bambino has experienced Specialists in each of the Departments. The team consists of
experienced engineers, management and finance professionals, food technologists,
nutritionists and has many long-term business associates.
Nutrition Department
Bambino Agro Industries has established a separate nutrition department with the aim
of building brand image and highlighting the nutritional facts. Below are some of the key
facts of nutrition department:
 Fully equipped kitchen with latest cooking range
 Consists of a team of two eminent nutritionists and four skilled cooks
 Has a seating capacity of 30-35 room which serves the agenda of educating
different groups of people on health, focusing balanced diet and special
counseling on lifestyle disorders-diabetes
 Conducts live cookery demonstration on low fat, zero cholesterol, high fiber
and healthy recipes high in calcium and iron out of Bambino’s Pasta and Pasta
Products is given to public with zero fee facility
 Organizes events such as Taste with Health, Bambino pasta products cookery
shows, and also conducts cookery demonstrations on healthy recipe
 Participates in food courts of various exhibitions to exhibit pasta recipes,
directly interacts with consumers on health benefits of the products and
provides general health tips
 Gives presentations on consequences of junk food and benefit of wheat based
pasta products in parent teacher meeting at different schools
Research & Development
Bambino has embarked on aggressive research and development mode and there is
considerable research going on new product development activities. Company applies
its scientific capabilities and consumer insights to contribute to advances in nutrition,
health and wellness of consumers.
Continual development, innovation, concept to commercial, line extensions, cost
reduction, improving market share have been the focus of Bambino. Though companies
refrain from investing in-house product development laboratory or R&D activity,
Bambino identifies the need for in-house R&D for development of products and
processes to make its presence strong in this competitive food business.
Bambino strictly follows a robust R&D activity across all stages of the food chain. It
starts from initial stage of agriculture and continues till primary processing for delivering
the excellent product meeting consumer delights. Today, Bambino is focused on all

these areas to deliver a quality product what consumer expects from their household
brand for more than two and half decades.
Domain knowledge of food science has become strong and today every aspect of food
and its processing is being addressed by science. There is need to complement
contributions of basic research on foods with knowledge of Indian systems of medicine
to develop functional foods, nutraceutical etc., and Bambino is focused to develop and
launch new foods in this category. Today R&D and product development are imperative
for agro, food-processing industries which will help the industry to succeed in the global
markets.
Company makes use of modern quality assessment methods and techniques developed
for effective quality monitoring of processed foods as per national and international
standards. All the products go through stringent quality assurance tests to monitor and
control all aspects of quality. Quality controllers ensure that the food does not contain
any harmful chemicals/preservatives that would destroy their nutrition value. Company
pays attention to maintain the flavor, calorie count, vitamins, nutrients and shelf life of
processed food items.
Teams of trained and experienced professionals look after production, delivery and
quality targets. The teams that work in company have vast experience in the industry
and thorough knowledge of all the involved processes. Company maintains a healthy
working environment and executes timely skills development training programs to
improve its teams.
Company considers R&D as a support to success and therefore, has invested well into
extensive R&D activities. Supported by R&D activities, company achieved benefits and
consumer on a global scale. Bambino has a dedicated R&D unit that is manned by a
professional team. Company’s R&D facility keeps itself abreast with the latest
technology and incorporated the required developments in processes for overall
improvement. With the active contribution of R&D unit, company has grown in its
sphere of operation.
BAIL has a well laid processing units strategically located across the country. The
production units are equipped with hi-tech processing plants to ensure the products are
of premium quality. Company units are well equipped and the products confirms to
national and international standards. All products are made of high quality ingredients
and have longer shelf life, owing to the latest and hi-tech technology used.

Products
Distribution

To ensure that the consumer gets the factory fresh stocks, FIFO (first in-first out) system
is maintained in all depots and carrying and forwarding agents and through stockists by
which Company ensures that the consumer gets fresh stocks.
Supplies to Canteen Stores Department (CSD)
Bambino supplies to all the CSD's through its various depots / carrying & forwarding
agents spread all over the country to millions of people in the Ministry of Defense,
ensuring quality and prompt supplies to them.
Exports
Bambino’s products are being exported to various countries including USA, Canada,
Australia & New Zealand, South East Asia, Middle East, Far East & Japan, and Africa.
An in-depth understanding of the consumer’s mind and food preferences has helped
Bambino develop a marketing philosophy that reflects the needs of customers. With
products created bearing in mind both health and taste, company’s products equally
appeal to kids and senior citizens as well. Bambino’s value-for-money positioning and
nutrition in its products allows people from all classes and age groups to enjoy products
to the fullest.
The Company has got a well equipped R&D and Nutrition department, which are in the
process of developing healthy foods & functional foods, which are required by everyone
in the present day life. These are the products, which are first tested for its efficacy and
then only produced by the company. Going forward, the company intends to look into
health food market in a big way.
Sales & Marketing
Bambino has got a well-trained team of Field Force comprising Sales Representatives,
Territory Sales Incharges, Sales Officers, Area Managers, Regional Managers, Zonal
Managers, General Manager & Vice President. They are all well-trained, well informed
and they have been molded into an energetic team to reach every part of the country.
The team is headed by respective manager in each state and nationally all of them
report to the Executive Director of sales & marketing.
Bambino has a separate sales team to look into the needs of Modern Trade, which is
spread over various parts of the country, through multi department and shopping
complexes. This ensures the products availability in every nook and corner of the
country.

Rural marketing
The Company has launched Rs. 5 vermicelli and Rs. 5 macaroni and even instant mixes
at Re.1, to ensure that it reaches the smallest person with the lowest income in the
smallest markets, through sub-stockists, direct dealers, and retailer coverage to the
smaller outlets.
Services to institutions and hospitals
Today, Bambino products are served in many important hospitals, as the products are
highly rated as a health food after the surgery, during convalescing period. This is a
great recognition for the quality. The company has also been supplying to 5 Star hotels
and chain of fast food restaurants. Many of the international chains have started using
Bambino products in place of imported products because of its quality, continuous and
constant supplies.
Bambino Utsav Women
Bambino has initiated a concept to reach the consumer and empower the unemployed
women to earn a reasonable income, by selling Bambino products to consumers. This is
a novel idea to make the women self-sufficient for her needs and also to be at the arm's
length to the consumer

2. Recent Development
Maintains Leadership Position in Pasta Products
The domestic pasta industry in India is highly fragmented, with the organized segment
accounting for about 28% of market share. It is estimated that the total installed
capacity of domestic Pasta Industry is about 3,00,000 TPA, out of which organized sector
accounts for about 85,000 TPA only. Industry reports indicate that the domestic industry
will have to add further capacity to cater to any further increase in demand.
Competitive pricing, expansions, aggressive advertising campaigns, attractive packaging,
and offering new value added products are the strategies used by the company to gain
market share.
Targeting Higher Profitability by Scaling up Business & Effective Cost Management
Company’s key thrusts for the current year would be to deliver profitable growth,
effective cost reduction management, aggressively scale up the FMCG initiatives
including brand building and maintain leadership position, introduce healthier life style
products in the pasta range, new offerings that would meet nutrition, taste and health
improvement factors.
Enhancement of Supply Chain and Sales Distribution Capabilities
The company also seeks to enhance supply chain and sales distribution capabilities.
Strong management and technical capabilities, good financial flexibility, experience of
the group of about 3 decades in manufacturing and marketing the pasta products, all
these initiatives are expected to provide sustainable growth by establishing the
company as the leading FMCG player in the pasta and other food segments.
Declared Dividend of 15% for Financial Year ended Sept 30, 2012
Company has paid dividend of Rs. 1.50 per share on 22nd
Dec’12 to share holders.
Dividend has been paid by the company after 15 years; last dividend was paid by the
company in the year 1997.

3. Financial Performance
Bambino Agro Industries reports net loss of Rs 8.1 million in the September 2012
quarter
Net loss of Bambino Agro Industries reported to Rs 8.1 million in the quarter ended
September 2012 as against net profit of Rs 0.1 million during the previous quarter ended
September 2011. Sales rose 11.49% to Rs 702.6 million in the quarter ended September
2012 as against Rs 630.6 million during the previous quarter ended September 2011.
For the full year, net profit rose 65.05% to Rs 30.7 million in the year ended September
2012 as against Rs 18.6 million during the previous year ended September 2011. Sales
rose 10.15% to Rs 2248.1 million in the year ended September 2012 as against Rs 2040.9
million during the previous year ended September 2011
Bambino Agro Industries net profit rises 91.55% in the June 2012 quarter
Bambino Agro Industries net profit rose 91.55% to Rs 13.6 million in the quarter ended
June 2012 as against Rs 7.1 million during the previous quarter ended June 2011. Sales
declined 0.02% to Rs 483.8 million in the quarter ended June 2012 as against Rs 483.9
million during the previous quarter ended June 2011.
1 2 3 4 5 6
Net Sales 483.86 630.64 541.2 520.47 483.84 702.57
Net Profit 7.06 0.13 11.01 14.25 13.55 -8.13
483.86
630.64
541.2 520.47
483.84
702.57
7.06 0.13 11.01 14.25 13.55
-8.13
-100
0
100
200
300
400
500
600
700
800
RsinMillions
Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Last 6 Quarters Net Sales & Profit

Current & Expected Earnings
Quarterly Ended Profit & Loss Account
Expected Earnings for FY 2012-13:
BAIL has posted highest sales ever in its last quarter results. In last 4 years, BAIL top line
has registered growth of 27% and bottom line is increased by 720%. We expect that
company with maintain its leadership position in pasta products by adding new range.
Company has posted total profit of Rs. 30.68 million with EPS of Rs. 3.82 for FY 11-12. As
per our estimates, company can achieve bottom line of Rs. 52 million registering EPS of
Rs. 6.5 for FY 2012-13.
Particulars
(Rs in Millions)
Dec
2011
Mar
2012
Jun
2012
Sep
2012
Dec
2012 E
Mar
2012 E
Audited / UnAudited UA UA UA UA UA UA
Net Sales 541.2 520.47 483.84 702.57 598.75 602.78
Total Expenditure 493.27 467.49 433.19 674.63 542.61 538.23
PBIDT (Excl OI) 47.93 52.98 50.65 27.94 56.14 64.55
Other Income 0 0 0 0 0 0
Operating Profit 47.93 52.98 50.65 27.94 56.14 64.55
Interest 24.68 28.63 26.53 25.25 31.42 36.12
Exceptional Items 0 0 0 0 0 0
PBDT 23.25 24.35 24.12 2.69 24.72 28.43
Depreciation 9.1 10.1 10.18 3.48 10.31 11.35
Profit Before Tax 14.15 14.25 13.94 -0.79 14.41 16.08
Tax 3.15 0 0.39 7.33 3.23 3.67
Provisions & contingencies 0 0 0 0 0 0
Profit After Tax 11.01 14.25 13.55 -8.13 11.18 12.41
Extraordinary Items 0 0 0 0 0 0
Prior Period Expenses 0 0 0 0 0 0
Other Adjustments 0 0 0 0 0 0
Net Profit 11.01 14.25 13.55 -8.13 11.18 12.41
Equity Capital 80.09 80.09 80.09 80.09 80.09 80.09
Face Value (IN RS) 10 10 10 10 10 10
Reserves 214.3 214.3 214.29 231.01 231.01 231.01
Calculated EPS 1.37 1.78 1.69 -1.02 1.39 1.55
Calculated EPS (Annualised) 5.5 7.12 6.77 -4.06 5.58 6.20
No of Public Share Holdings 2067056 2067056 2067056 2056862 NA NA
% of Public Share Holding 25.81 25.81 25.81 25.68 NA NA

4. Charts & Graphs
i) Share holding Pattern:
Promoters share holding is 74.32%, increased by 0.13% in last quarter. FII exposure is nil
where as DII exposure is negligible at 0.07%.
ii) Share Price Moving Average:
Bambino is currently trading above its 50 and 200 day price moving average. Stock has
support in range of Rs 50-53 levels.

iii) Performance Chart:
Company has shown consistent growth in net sales but net profits were marginal due to
high raw material prices and interest paid on debt by the company.
iv) Comparative Graph:
BAIL has given positive returns of 95.68% compared to Sensex returns of 25.82% in last
one year.

5. Peer Group Comparison
PEER GROUP Bambino Agro ADF Foods DFM Foods Heritage Foods
CMP 55.65 78.00 202.45 491.10
52 W H/L 70.80/23.95 80.90/44.00 289.00/166.10 562.50/133.15
Market Cap 445.69 1586.71 2024.84 43.84
Results (in Million) Sep-12 Sep-12 Sep-12 Sep-12
Sales 70.26 31.33 61.57 402.14
PAT -0.81 2.36 2.19 14.48
Equity 8.01 20.58 10.00 11.53
EPS 3.83 4.56 8.63 26.23
P/E 14.53 17.22 23.46 18.78
6. Key Concerns / Risks
 There is no entry barrier in the food processing sector, new players can foray into
this segment thereby intensifying the competition leading to price wars and thereby
affecting the realizations.
 The company’s profitability also depends on vagaries of monsoon which can affect
the availability and price of the raw materials.
 Company can continue to face intensified competition from both organized and
unorganized sector. Moreover, there is risk of spurious / counterfeit products
flooding the market, which can have negative impact on sales volumes and affect
the profitability of genuine and reputed players.

7. Saral Gyan Recommendation
Increasing urbanization, changing demographic profile of the Indian population,
rising income and propensity towards disposability, rapid economic growth over
the last few years is expected to result in sustained increase in per capita income
which would further propel the movement of growth of FMCG sector. We
believe Bambino Agro Ltd would look to exploit this opportunity for accelerated
growth in the coming years by leveraging the company's brand strength.
Bambino has launched Raagi Vermicelli in the health and wellness segment. Also
launching Instant Pasta in different flavours in the current year and has plans to
launch multigrain vermicelli and different variants of pasta products under
nutrition and health platform. The company is looking forward to increase its
reach in the rural market with appropriate distribution strategies in place.
The Company is in the process of further strengthening the in-house R & D to
focus on development of nutritional, functional foods with added health
benefits. Management is confident to deliver improved growth in the current
year with better revenue management, cost management and product
innovation to fulfill the needs of consumers of different preferences.
Sales turnover of the company has increased by 27% in last 4 years, where as net
profits have increased by 720% during same period. PAT Margins increased from
0.21% to 1.36%. Performance ratio’s ROA and ROE also shown consistent
improvement in last 4 years.
Particulars Sep 2009 Sep 2010 Sep 2011 Sep 2012
Operational & Financial Ratios
Earnings Per Share (Rs) 0.46 2.01 2.30 3.79
CEPS (Rs) 4.04 3.95 6.41 7.85
DPS (Rs) 0.00 0.00 0.00 1.50
Book NAV/Share (Rs) 26.06 29.09 33.01 36.86
Tax Rate (%) 63.22 34.63 32.61 20.11
Margin Ratios
Core EBITDA Margin (%) 4.97 5.28 7.73 7.95
EBIT Margin (%) 4.79 5.65 6.12 6.38
Pre Tax Margin (%) 0.57 1.29 1.35 1.70
PAT Margin (%) 0.21 0.84 0.91 1.36
Cash Profit Margin (%) 1.83 1.66 2.54 2.82
Performance Ratios
ROA (%) 0.46 1.80 1.74 2.71
ROE (%) 1.73 7.28 7.41 10.85
ROCE(%) 11.14 12.71 14.07 15.66

Higher debt on balance sheet is a concern but we do not see it as a major risk
considering available cash reserves and promoters share holding of almost 75%
in the company. Moreover, BAIL operates in an industry which offers huge
growth potential, if management decides to dilute its stake to reduce debt
burden or for expansion, there is a lot of scope for the company to get rerated
from current valuations.
Considering better margins and higher sales turnover, we believe that Bambino
Agro can deliver bottom line of 52 million for full financial year Oct’12 – Sept’13
with annualized EPS of Rs. 6.50.
Management has declared dividend of Rs. 1.50 for share holders for the first
time. We believe performance margins of the company will continue to improve
in coming quarters considering increase in top line and proper cost management
and utilization of resources.
On equity of Rs. 80.09 million, the estimated annualized EPS for FY 12-13 works
out to Rs. 6.50 and the Book Value per share is Rs. 38.84. At current market price
of Rs. 55.65, stock price to book value is 1.43 with forward P/E ratio of 8.5 which
makes stock valuations reasonable with a long term view of 18-24 months.
Considering reasonable valuations and growing demand for ready to eat /fast food
with high nutritious value in domestic food industry, we find Bambino Agro Industries
Ltd as a good investment opportunity for long term. Saral Gyan Team recommends
“BUY” on Bambino Agro Industries Ltd. for a target of Rs. 120 over a period of 18-24
months.
Buying Strategy:
 50% at current market price of Rs. 55.65
 50% at price range of Rs. 40 - 45

8. Disclaimer
Important Notice: Saral Gyan Capital Services is an Independent Equity Research Company.
© SARAL GYAN CAPITAL SERVICES
This document prepared by our research analysts does not constitute an offer or solicitation for
the purchase or sale of any financial instrument or as an official confirmation of any transaction.
The information contained herein is from publicly available data or other sources believed to be
reliable but we do not represent that it is accurate or complete and it should not be relied on as
such. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in any
way responsible for any loss or damage that may arise to any person from any inadvertent error
in the information contained in this report. This document is provide for assistance only and is
not intended to be and must not alone be taken as the basis for an investment decision.

Saral Gyan Hidden Gem - Dec 2012

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