Fauji Foods Limited – New Giant in the making

Building an excellent reputation over the last 45 years, Fauji Foods Limited (Formerly Noon Pakistan Limited) continues to be at the forefront of quality products. By the grace of God, it has achieved market leadership in several food categories with a very strong portfolio consisting of Butter, Cheese, UHT Milk, HCLF, Pasteurized Milk, Tea whitener, Flavored Milk, Cream, Desi Ghee, Fruit Juices, Honey and Jam.

Fauji Foods Limited (Formerly Noon Pakistan Limited) was incorporated in Pakistan on 26 September, 1966 as a Public Limited Company and its shares are quoted on Pakistan Stock Exchange Limited.

In the private sector, Fauji Foods Limited (Formerly Noon Pakistan Limited) is the first Company in Pakistan to operate a Spray Dryer for processing of milk powder. At present, the Company is principally engaged in processing and sale of various dairy products and juices with the brand name of

The Company is a member of Fauji Group of Companies and is being overseen and managed by highly qualified, experienced, technical & business professional Directors and Senior Executives.

Positives:

• Capacity expansion from 200k litres/day from 600k litres/day, likely to be announced on Jan 28^th.
• Diversified and decent brand product mix including:
  • Tea whitner
  • Dairy drink
  • UHT milk
  • Pasturised milk
  • Juice
  • Flavoured milk
  • Butter
  • Cheese
  • Others
• GP margins at 7% (compared to Efoods at 25%), which are likely to increase as new plant comes online and installation of power plant by next year.
• Army will be a major buyer of FFL milk (1mn Army personnel and if consume 500ml milk daily should make 500k litres/day)
• 2016 loss was on the back of increased distribution cost (PKR 1.1bn representing PKR 7rs loss otherwise company would have breakeven). This revamping should result in increased sales.
• Very cheap valuations compared to Efoods (which is only milk compared to FFL with diversified product range)

• Revamp of old products like Nurpur Butter and Milk powder in the medium term that will be an upside risk to our earnings estimates.
• Packaged milk market share constitutes 12-13%, so huge potential for the whole milk market. Parallel efforts by Ministry of Health and packaged milk manufacturers to increase awareness about packaged milk will result in significant increase in conversion rate from loose milk to packaged milk like Egypt.