The presentation is an attempt to collate thoughts on the investment process we follow from the Gurus, Mentors and Friends we follow along with our own experience in this field. *Disclaimer* 1. We are not SEBI registered analysts 2. Educational post only and not a stock recommendation 3. We take no responsibility to keep updating about the business being discussed 4. We may or may not own a position in any of the businesses being discussed and even if we do own a position, we may change our mind due to change in any facts or circumstances 5. Plz consider this post only as a framework to keep tracking businesses and understanding them

1. Ashish Kila
Perfect Research
Aug 2016
Our Investment Philosophy…

2. • The content of this presentation are only for information of the
participants and not to be construed as investment advice. Please
consult your financial advisor before acting on it.
• Disclosure regarding ownership of stock(s) discussed- “Invested”
• We are not registered as Research Analyst/Investment Advisor.
Mandatory disclosure as per SEBI RA regulation (irrespective of whether
registered or not):
• The research analyst owns stock in the subject company and that’s
the only financial interest in the subject company

3. • We don’t have actual/beneficial ownership of one per cent or more
securities of the subject company (at the end of the month
immediately preceding the date of publication of the research
report or date of the public appearance);
• We don’t have any other material conflict of interest at the time of
publication of the research report or at the time of public
appearance
• Our associates have not received any compensation from the
subject company in the past twelve months;

4. • Associates have not managed or co-managed public offering
of securities for the subject company in the past twelve months;
• Associates have not received any compensation for investment
banking or merchant banking or brokerage services from the
subject company in the past twelve months;
• Associates have not received any compensation for products or
services other than investment banking or merchant banking or
brokerage services from the subject company in the past twelve
months;
• Subject company is/was not a client during twelve months
preceding the date of distribution of the research report and the
types of services provided:
• Research analyst has not served as an officer, director or employee
of the subject company;
• Research analyst or research entity has not been engaged in market
making activity for the subject company.

5.  Our Chairman - Mr. R.A. Kila
 Perfect Research Team

6. My Profile
 CA
 MBA from MDI, Gurgaon
 Worked with - Goldman Sachs &
Religare Securities & Morgan Stanley
 Currently working as
• Director, Perfect Group
• CIO, Perfect Research
With Mr. Ashish Dhawan With Mr. Basant Maheshwari With Prof. Aswath Damodaran
Blessed to have got Vicarious Learnings
from my Role Models …

7.  For us In the words of Bharat Shah
Predictability of earnings are more important
than growth in earnings
(if you can’t value a business, price has no
meaning)
Quality of earnings are more important
than Quantum of earnings
‘Longevity’ vs. ‘Magnitude’
‘Accelya’, ‘OFSS’,
‘Mahanagar Gas’, ‘IGL’
‘CARE’, ‘Nesco’, ‘Kovai’, ‘IGL’,
‘Mahanagar Gas ’
‘Nestle’

8.  ATFL
o 80% of revenue contributed by edible oil (Sundrop & Crystal)
o 20% from Foods (Act II Popcorn, Sundrop Peanut Butter)
 The Parent- ConAgra:
o ATFL is affiliated to ConAgra Foods, Fortune 500 company
and is one of North America's largest packaged food companies.
o ConAgra Foods' consumer brands can be found in 99 percent of America's
households and its 27 consumer brands enjoy No. 1 and No. 2 positions in
their respective categories and 29 consumer brands generate >USD100mn (Rs
600 Cr.) in retail sales each year.
 Brands of ConAgra :-
source: www.conagrafoods.com

9.  In case of ATFL:
Management is taking decisions of expansion where they have clear right to
win. It is impacting the growth of the company in shorter term but holds the
key for the success in the future.
• Early mover advantage in potentially large categories
◦ Extruded snacks market at ~ 12000 cr. , growing @ ~10%
◦ Potato chips at ~ 6 – 7k cr.
◦ Popcorn estimated to be less than 300 cr.

10.  Twitter – capacity to suffer

11.  Transitioning from Commodity to Brand: Management could easily invest in ‘Sundrop’
and increase the top line however chose to back branded foods
Particulars FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Net Sales (In Cr.) 780 653 721 705 789 764 760 782
Gross margin %(1-RM/Sales) 22.4 29.6 26.9 29.7 31.3 32.8 35.1 33.80
Particulars FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
OIL 87% 85% 83% 85% 83% 81% 79% 77%
FOOD 13% 15% 17% 15% 17% 19% 21% 23%
50%
> 40%
Future

12.  Management is confident for its food portfolio to treble its revenue to
Rs. 5000 cr. In five years by entering new product categories -
Source: http://bit.ly/2c5yMHW
Annual Report
Particulars FY11 FY12 FY13 FY14 FY15 FY16 FY21E
Inorganic Chemicals 50% 48% 51% 52% 49% 48%
Fertilizers 39% 41% 37% 35% 38% 39%
Other Agri inputs 11% 11% 12% 13% 12% 12%
FMCG + *Others 0% 1% 1% 1% 3% 2% >20%
Total 100% 100% 100% 100% 100% 100%
*Others includes Water Purifier, Nutritional Solutions
• Pulses forming approx. 88% of total ‘Others’ revenue
• By FY21 out of 27% (Others business), food business can contribute >20% if
management meet the expectations
Particulars FY11 FY12 FY13 FY14 FY15 FY16
Total Income from Operations (net)
(in cr.) 11,061 13,815 14,859 15,895 17,203 17,708

13.  Quality, Cost, Time
• In the triangle of quality, cost and time, one
can get two out of three.
• In case of Agro Tech, management says they
must get the cost structure right otherwise
they will have to pay for it in future – so
they chose high quality at low cost

14. 0%
5%
10%
15%
20%
25%
30%
35%
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
2011 2012 2013 2014 2015 2016
CFO CAPEX ROE ROCE
Increasing Capex
Reducing ROE, ROCE
Aggressive Investments vis-à-vis CFO, taking hit on short term return ratios
Making difficult but value creating capital allocation choices:
A tough business to create but equally tough to destroy
Fig. in Cr.
Source: Ace EquityNote: ROE, ROCE are on secondary axis

15. It is not the magnitude of returns that matter but it is the
durability of returns which matters the most
 In case of AgroTech, company has no major competitor in Act 2 popcorn in
India (Virtual Monopoly and a first mover advantage)
 Company has successfully placed Act 2 popcorn in India where now it has
an edge over competitors
 Now, it is focusing on the peanut butter to leverage their competitive
advantage
 Taste advantages are durable – ‘Maggi’ vs. ‘Everyuth’

16. To find a wonderful business, One
needs to find them small and get
them when they’re little.
‘Agrotech’, ‘Wonderla’, ‘PVR’,
‘V-Mart’, ‘CCL’, ‘DCB Bank’, ‘IDFC Bank’
Size of fish is important in relation
to the size of the pond

17. Source: Yahoo Finance
http://bit.ly/2cak0Qb
http://bit.ly/2cdc1Sr
ConAgra
Foods, Inc.
Unilever Plc.
Difference in no. of
times
Mcap(in Billion $) 20.33 131.83 6.5x
Revenue*(in Billion $) 11.64 58.79 5x
Agro Tech Foods
Ltd.
Hindustan Unilever
Ltd.
Difference in no. of
times
Mcap(in Billion INR) 11.94 1999.02 167x
Revenue**(in Billion
INR)
7.82 331.94 42x
Globally
In India
Scope of opportunity
 ConAgra Vs Unilever
*TTM figures as on 30th June 2016
**TTM figures as on 31st March 2016
Global
Popcorn
52,000 cr.
North
America
31,876 cr.
Latin
America
6,552 cr.
Europe
9,724 cr.
APAC
3900 cr.

18.  The food market in India is pegged at Rs 6 lakh crore, including rice, staples, flour,
spice, pulses with many segments controlled by unbranded players including local
kiranawallahs
2,00,000 cr. 5% 98%
40,000 cr. 5% 85%
Industry Size
Unorganized
Share
Industry
Growth
Source: Stalwart Advisors
http://bit.ly/2c5yMHW

19.  India has around 150 no. of Parks, out of which 16 parks are spread over 40
acres of land and rest are merely over 10-20 acres
 Unorganised or standalone parks are inefficient to meet the growing demand in
the Amusement industry
Market Size
3,000 cr.
Industry
Growth
20%
Organized
market
75%
Source: Annual Report,
Stalwart Advisors
Particulars Global U.S EMEA China India
Industry Size
(in INR cr.)
1,62,500 > 78,000 32,500 21,450 3,000
No. of Parks >800 400 >300 850 150
India:
I USD= 65INR

20. DATE:- 31/03/2016
* As on Date
Source: Money control
 Banking is all about its management quality and Risk
management practices -
Banks *M.CAP(In Rs. Cr.) P/B ROE
3,17,674 3.73 16.91%
18,196 1.2 3.42%
3,318
1.3 11.16%

21. If you’re right about “what”, you don’t have to worry
about “when” very much”
You don’t need to focus too much on “when”, you only
need to focus on “what”
With a wonderful business, you can figure out what will
happen, you cannot figure out when it will happen

22. ATFL is available at the following valuations:
1994 Nestle similar to
Agro tech today ?
Nestle Today – after 20
years
Particulars fig. in Crs.
Topline 700
Profit 40
M.Cap 2,500
Particulars Value inCrs. CAGR
Topline 10,000 14.4%
Profit 1,200 18.4%
M.Cap 61,000 17.2%
Particulars Multiples
Price to Sales 1.46x
Stated Earnings 23x
Owner's Earnings <20x
Source: Annual Report

23.  Inefficiency in pricing of quality business mentioned by ‘Prof.
Sanjay Bakshi’
“The market’s inability to spot an emerging moat that is
growing slowly over time (the “boiling frog syndrome”)”
Source: http://bit.ly/2bmogHG

24. Perfect Research
T-24A Green Park Extn.
New Delhi – 16
Blog: http://perfectresearch.blogspot.in
Twitter: @ashishkila
Please feel free to contact me with any unanswered
questions, suggestions & ideas.
 ashishkila@gmail.com
 +91-9999751327
Do you have any Questions, Comments
or concerns ?